For assessment of KMP performance and payment of variable pay/incentives, insurers must mandatorily consider six broad parameters. The six parameters together will account for 50% of the overall performance assessment for variable pay.
Hyderabad:The IRDAI led by Ajay Seth has laid down some of the stringent norms in a bid to qualitatively improve the performance of the Indian insurance industry in key parameters..
The IRDA’s new remuneration and disclosure framework, released on Monday, for insurers significantly strengthens transparency, accountability and policyholder-centric governance in the insurance sector by linking remuneration of senior management and Key Management Persons (KMPs) with measurable business outcomes, customer service standards and risk management parameters.
Remuneration Disclosure Requirements
Insurers will be required to publicly disclose:
-Parameters forming the basis of remuneration packages, including incentives, for:
-Managing Director (MD) & CEO
-Directors
-Key Management Persons (KMPs)
-Payments made to:
-Group entities
-Related parties
These disclosures are aimed at improving governance transparency and enabling informed decision-making by policyholders and the public…
Mandatory Public Disclosure of Performance Parameters
Insurers must disclose performance metrics used for determining variable pay and incentives of KMPs on their websites in an “easy to access and easy to understand format, without requiring visitors to provide personal information such as phone numbers.
The disclosures must also include corresponding data for the previous three years.
Frequency of Disclosures
-Financial soundness indicators: Quarterly
-Product performance, claims responsiveness and grievance redressal: Monthly
Integrated Remuneration Policy
The Nomination and Remuneration Committee (NRC), in consultation with the Risk Management Committee, must ensure that remuneration policies:
-Align with policyholder outcomes
-Adjust for all forms of risk
-Maintain symmetry between remuneration and risk outcomes
-Reflect the time horizon of risks
-Ensure an appropriate mix of cash and equity compensation
Mandatory Performance Parameters for FY 2026-27
For assessment of KMP performance and payment of variable pay/incentives, insurers must mandatorily consider six broad parameters. The six parameters together will account for 50% of the overall performance assessment for variable pay.
Overall Financial Soundness
For Life Insurers
Key metrics include:
-Assets Under Management (AUM) to Total Premium ratio
-Renewal Premium to New Business Premium ratio
-Ratio of policies issued to policies exited
-Expense of Management to Gross Direct Premium ratio
For General & Standalone Health Insurers
Mandatory metrics include:
-Line-wise Net Incurred Loss Ratio
-Line-wise Renewal Premium to New Business Premium ratio
-Expense of Management to Gross Direct Premium ratio
Products’ Performance
Disclosure requirements include:
-Features, premiums, performance and returns of products contributing 90% of new or renewal premium
-Board-approved policies on:
-Commission payments
-Product approvals
-Anti-fraud measure
Claim Responsiveness
Applicable to retail lines such as:Motor,Health,Personal Accident,Homeowners,Retail Fire,MSME package policies.
Insurers must disclose time taken to settle claims:
-Within 15 days
-Within 30 days
-Within 60 days
-Beyond 60 days
Proportion of claims:
-Paid in full
-Paid partially
-Repudiated
-Rejected
-Closed
-Remaining unsettled
-Value proportion of claims settled
Importantly, timelines will be counted from the date of claim filing and not from submission of complete documents.
Grievance Redressal
Insurers must:clearly segregate grievances and service requests and disclose:
-Number and proportion of grievances resolved within 15 days, 30 days, beyond 30 days and pending unresolved grievances
Implementation of Indian Accounting Standards (Ind AS)
Compliance with Ind AS implementation will form part of the performance assessment matrix.
Elimination of Dark Patterns
Insurers must ensure removal of misleading or manipulative digital practices (“dark patterns”) and similar compliance by distributors and intermediaries.
Weightage Structure
The six parameters together will account for 50% of the overall performance assessment for variable pay.
-Ind AS implementation: 10%
-Removal of dark patterns: 10%
-Remaining four parameters: Weightage to be decided by the Board
Board Oversight & Benchmarking
-Boards must determine improvement benchmarks aligned with business strategy.
-Performance assessment can be undertaken only after complete and consistent disclosures are made.
-Disclosure of insurer performance under the framework will be mandatory.