IRDAI Mandates Linking Executive Compensation to Customer-Centric Performance Metrics

Irdai Introduces New Remuneration Guidelines for Insurers

The Insurance Regulatory and Development Authority of India (Irdai) has introduced new guidelines for insurers to link the remuneration packages of Managing Directors (MDs), Chief Executive Officers (CEOs), and other senior management to customer-centric outcomes. The revised regulations aim to enhance transparency, accountability, and customer trust in the sector.

The new remuneration guidelines are part of the IRDAI (Corporate Governance for Insurers) Regulations, 2024, which have come into effect immediately. The guidelines outline the parameters forming the basis of remuneration packages, including incentives, for MDs, CEOs, and other senior management officials. The parameters include financial soundness, products' performance, claim responsiveness, timely grievance redressal, and removal of dark patterns from websites of insurers and their distributors.

The guidelines also mandate disclosure of the performance of insurers in respect of parameters adopted for remuneration of all Key Management Persons (KMPs). Insurers are required to disclose information on a quarterly or monthly basis, depending on the parameter, in an easy-to-access and easy-to-understand manner on their website.

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The revised performance framework aims to move beyond traditional operational and financial metrics to include a stronger focus on customer-centric and governance-oriented outcomes. The updated framework empowers Boards to emphasize improvement in customer satisfaction and experience indicators, timely resolution of claims and grievances, reduction in repeat complaints and service failures, and delivery of fair, transparent, and customer-friendly processes.

Irdai aims to enhance transparency and accountability through timely, consistent, and accurate disclosure of comparable information across insurers for the current and preceding three years. The regulator also plans to refine and revise regulations to reduce the expense of management, promote rural and social obligations, and boost coverage of government-promoted schemes such as PMJJBY and PMSBY.