IRDAI Directs Insurers to Link Senior Executives Pay Packages with Customer Metrics

The Insurance Regulatory and Development Authority of India (IRDAI) has revised remuneration rules for senior executives at insurance companies, bringing customer service and claims handling into the performance assessment framework for top management, as per PTI reports. 

The revised norms apply to managing directors, chief executive officers, whole-time directors, and other key management personnel (KMPs). The changes will be effective for performance evaluations from FY27 onwards. 

Customer-Focused Parameters Added 

Under the updated framework, insurers will have to consider customer-centric measures while deciding variable pay and incentives for senior officials.  

These include claims responsiveness, grievance redressal, product performance and removal of “dark patterns” in customer and distributor interactions. 

IRDAI has assigned 50% weightage to these operational and governance-related parameters. Implementation of Indian Accounting Standards and removal of dark patterns will each carry a 10% weightage, while boards can decide the weight for other metrics. 

The remaining 50% weightage can be linked to company-specific business targets and financial performance indicators. 

Role of Board and Committees 

The regulator said the Nomination and Remuneration Committee (NRC), along with the Risk Management Committee, must ensure that remuneration policies remain aligned with policyholder interests and the risk profile of the company. 

The framework also requires insurers to maintain a balance between remuneration outcomes and risk outcomes over a longer period. 

For life insurers, financial soundness metrics include ratios related to assets under management, renewal premiums, persistency of policies and expense management. General and health insurers will be assessed using incurred loss ratios, renewal ratios and expense ratios. 

Disclosure Requirements Tightened 

Insurers will also be required to disclose details of remuneration-linked performance parameters on their websites. The disclosures must include performance trends for the previous three years in an accessible format. 

Companies will additionally have to publish data on claims settled within 15, 30 and 60 days, along with pending claims and grievance resolution timelines.  

Financial soundness disclosures will be updated quarterly, while customer service-related data must be updated every month. 

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Conclusion 

The revised framework will apply from FY27 and requires insurers to include customer service, claims handling and governance measures while determining executive pay. 

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