Insurers resist as customer comfort weighs on exec pay

Mumbai: The insurance industry is pushing back against parts of a proposed , arguing that some of the performance-linked metrics under discussion risk becoming overly prescriptive. The Insurance Regulatory and Development Authority of India () is internally discussing a sharper and granular framework for evaluating chief executives and senior officers at insurance companies, with greater emphasis on timelines, customer complaints, expense management and , according to people familiar with the matter.

Under a draft proposal circulated to insurers for feedback, Irdai has proposed linking chief executive compensation to a 40-30-30 structure, with 40% tied to customer-related metrics, 30% to shareholder-linked metrics and 30% to regulatory parameters. This compares with the current broader 60-40 regulatory-shareholder split.

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The proposed framework seeks to move governance standards beyond premium growth and profitability by embedding customer service outcomes into management evaluations.

“Earlier the framework broadly said KPIs around claims, customer servicing and expenses should form part of management evaluation. Now discussions are around introducing specific and measurable parameters,” said a person aware of the matter.

The metrics under discussion could include claims settlement turnaround time, complaint resolution benchmarks, persistency ratios, loss ratios and reductions in expense of management ratios.

Several insurers, however, have told the regulator that a one-size-fits-all approach may not work for companies with different business models, growth strategies and market positions.

Executives said mandatory thresholds on parameters such as expense reduction or claims-related metrics could disproportionately affect growth-stage insurers investing heavily in expansion, distribution and customer acquisition.

“If a company wants to move from being a mid-sized player to a top-five insurer, investment and expansion costs will naturally rise,” said an industry executive. “The framework should remain principle-based rather than overly prescriptive.”

The submitted feedback to the regulator ahead of the May 15 deadline, recommending greater flexibility for boards and nomination and remuneration committees to determine which customer-focused metrics are most relevant for their organisations.

Industry executives said insurers should retain flexibility in selecting KPIs depending on their operating context.

The discussions come as the regulator increases scrutiny of claims servicing, customer grievance redressal and distribution costs, particularly in health insurance where disputes over claims and cashless hospitalisation have intensified.