The Insurance Regulatory and Development Authority of India (IRDAI) has introduced new regulations linking the remuneration of key managerial personnel (KMPs) at insurance companies to policyholder outcomes and business performance, while also tightening disclosure requirements to strengthen corporate governance across the sector.
Under the new framework, the remuneration of KMPs, beyond just managing directors and chief executive officers, will be tied to policyholder goals, insurance performance and risk outcomes. Insurers will also be required to publish the parameters used to determine remuneration on their websites.
IRDAI has said that the Nomination and Remuneration Committee of an insurer, in consultation with the Risk Management Committee, will be responsible for framing the remuneration policy.
The regulator has laid down broad principles for these policies, requiring remuneration to be aligned with policyholder outcomes and adjusted for various forms of risk. The structure of pay must remain proportionate to risk outcomes, account for the time horizon of risks, and ensure that the mix of cash and equity rewards supports risk alignment.
For life insurance companies, IRDAI has specified minimum parameters for determining variable pay and incentives. These include the ratio of assets under management to total premium, renewal premium to new business premium ratio, the proportion of total policies issued during the year compared with policies exiting the books, and the ratio of management expenses to gross premium.
For general insurance companies, variable remuneration will be linked to metrics such as line-wise net incurred claims ratio, loss ratio, line-wise renewal premium to new business premium ratio, and the ratio of management expenses to gross direct premium.
Alongside remuneration reforms, IRDAI has introduced stricter disclosure requirements for insurers. Insurance companies will now have to display details of product features, premiums, performance and returns on their websites.
The regulator has also mandated disclosure of commission-related information, including average and maximum commission payments, line-of-business-wise commission payouts and the policies governing such payments.
Further, insurers will have to publish detailed information on claims settlement timelines, including claims settled within 15 days, 30 days and 60 days, along with details of pending or unsettled claims.
The new norms also require insurers to disclose grievance redressal data, including the speed at which customer complaints are resolved, as part of IRDAI’s broader effort to improve transparency and strengthen governance standards in the insurance industry.
Trupti Balasubramaniam, CEO and Principal Officer at Probus, an Indian InsurTech and digital insurance platform, said the new framework could improve accountability and transparency in the insurance sector by linking executive incentives to operational metrics such as claims responsiveness and product performance. She added that enhanced disclosures may help customers and intermediaries compare insurers more effectively.
