The Insurance Regulatory and Development Authority of India (Irdai) has issued a circular dated May 25, directing insurers to revise the evaluation and compensation of senior executives. Under the new framework, performance must be closely tied to customer outcomes, transparency, and governance.
New Performance Parameters
Insurers are required to align the performance metrics of key management personnel with measurable customer outcomes. This marks a shift from a narrow focus on financial and operational indicators. Companies must now disclose standardized data covering financial soundness, product performance, claims handling, grievance redressal, and customer service quality.
Objectives of the Move
The initiative aims to strengthen customer trust, improve transparency, and reinforce accountability across the insurance sector. Irdai stated that it seeks to reduce information asymmetry and empower policyholders to make informed decisions. The regulator said, "Irdai is moving towards removing information asymmetry in the sector and empowering policyholders to make informed decisions."
Ajay Seth, chairman of Irdai, explained the rationale: "Evolving expectations of customers and needs of the economy require us to place greater emphasis on measurable customer outcomes, transparency in decision-making, responsiveness, and sustainable value creation."
This revised framework is expected to drive a customer-centric culture among insurers, ensuring that executive incentives are aligned with delivering value to policyholders. The regulator emphasized that the changes are essential to meet the dynamic needs of the economy and enhance the overall health of the insurance industry.
