The Insurance Regulatory and Development Authority of India (IRDAI) has overhauled rules governing top executive pay at insurance companies, mandating that bonuses and incentives for Key Management Personnel (KMPs) — including chief executives — be directly tied to measurable customer outcomes, financial soundness, and transparency disclosures. The new framework takes effect from FY27, reshaping how India's insurance sector rewards its leadership.

What the New Framework Requires

Under the revised norms, at least 50 per cent of a KMP's performance evaluation must be anchored to defined customer-centric parameters. These include claims settlement speed, grievance redressal rates, product performance, cost efficiency, policy retention, and complaint resolution rates.

Crucially, compliance with accounting standards and the elimination of misleading 'dark patterns' in customer interactions — deceptive design elements that nudge policyholders into unintended decisions — will carry fixed weightage in assessments. This signals a regulatory intent to clean up sales and onboarding practices that have long drawn consumer complaints.

Disclosure Requirements

The IRDAI circular mandates that insurers publish performance metrics in a simple, accessible format on their company websites, along with corresponding data for the preceding three years. The regulator has specified granular claims disclosure: insurers must report the proportion of claims settled within 15 days, 30 days, 60 days, beyond 60 days, and those remaining unsettled at month-end.

Financial soundness indicators must be published quarterly, while product performance, claims responsiveness, and grievance handling metrics are to be disclosed monthly. The move is explicitly aimed at enabling policyholders to make more informed decisions when choosing or renewing insurance products.

Board Accountability and Benchmarks

The framework places the onus on each insurer's Board of Directors to set improvement benchmarks aligned with the company's business strategy. Critically, the Board may assess KMP performance only when complete and consistent disclosures have been made — creating a compliance prerequisite for pay decisions.

This structural linkage between disclosure and remuneration is a notable departure from earlier norms, where pay structures were largely governed by internal board discretion without mandatory customer-outcome anchoring.

100% FDI in Insurance Cleared

Separately, the Union government has notified 100 per cent foreign direct investment (FDI) in the insurance sector under the automatic route, opening the door to greater participation by overseas investors. Foreign investment will remain subject to compliance with the Insurance Act, 1938, and will require mandatory approval from IRDAI for undertaking insurance and related activities.

Together, the executive pay reform and the FDI liberalisation mark a significant regulatory reset for the Indian insurance sector — one that prioritises customer trust while signalling openness to global capital.