Very soon, your insurance company’s chief executive officer (CEO) could well break into a sweat if their subordinates reject your claim without fair assessment.Under rising public pressure over claim rejections and other complaints, the Insurance Regulatory and Development Authority of India (Irdai) has recently linked the remuneration of CEOs as well as top management of insurance companies to how effectively they serve their customers, besides financial parameters.These will be measured by how many existing policyholders renew their policies, as opposed to new customers who come in (renewal premium-to-new business premium ratio), and by how they approach their claim-related complaints (claim responsiveness and grievance redressal), among others.Under ‘claim responsiveness’, insurers have to declare the proportion of claims settled (in full, in part, repudiated or rejected or closed) within 15 days, 30 days, 60 days, and so on, as well as the value proportion of claims settled, that is, in terms of claimed amount. It should take into account partial settlement and claims denied.The rationaleIrdai has asked insurers to disclose three-year data on these key parameters on their websites. They will also have to display board-approved policies for commission payouts (average and maximum amounts for each product or line of business). Premium disclosures should include premiums for the model insurance cover or age, as well as an increase in premiums over the preceding three years.“Today, there is a trust deficit in the insurance industry. The focus should be on customers first, then shareholders, whereas shareholder interests currently tend to dominate. So, in principle, CEO KPIs (key performance indicators) should be aligned more closely with customer outcomes. In that context, this is a good move by the regulator,” says Vighnesh Shahane, former MD and CEO, Ageas Federal Life Insurance, adding that Irdai had initiated this exercise five years ago. Subsequently, in May 2024, it issued a master circular on corporate governance, prescribing some of these rules for determining CEO pay.“The master circular was very broadbrush in nature. The latest circular constitutes more hand-holding. It reflects Irdai’s assessment that insurers are not yet at the level of maturity where broad principles alone are sufficient,” points out a former Irdai official, who spoke on the condition of anonymity.The current Irdai circular differs from the existing guidelines in that the parameters were broader and insurers had greater flexibility earlier. “The new circular specifies parameters, such as financial ratios, product performance, fraud-control measures, claim responsiveness, and so on. Earlier, much of this information was available to the regulator. Now, the framework has moved from regulatory visibility to public transparency,” says Nilesh Sathe, industry veteran, and former member, Irdai.Shahane believes that this is the right step. “If incentives are aligned to such customer-centric parameters, the entire organisation starts thinking about the customer first,” he says.Advantage policyholders?Linking customer responsiveness and grievance redressal metrics to management accountability may boost customer experience. “It creates a stronger incentive to resolve customer concerns efficiently and consistently,” says Shilpa Arora, Co-founder and Chief Operating Officer, Insurance Samadhan, a firm that assists policyholders in getting their complaints resolved. The regulatory framework already prescribes the timelines and standards for claim processing and grievance handling. “The greater the focus on adherence to these standards, the better the overall customer experience is likely to be,” she adds.From the policyholders’ perspective, the most important questions are: How quickly are complaints resolved? Are policies lapsing because they were not sold appropriately? “When a policy lapses, everyone loses out. Products must be sold the right way so that customers see value and continue to renew,” says Shahane.New CEO pay rules: Promises & limitationsThe new rulesIrdai has linked CEO remuneration to multiple metrics, including customercentric ones, such as claims, grievances and product performance.When?Irdai issued the circular on 25 May 2026.The purposeTo align top executives’ incentives more closely with policyholder outcomes and reduce trust deficit in insurance sector.Who will be impacted?Insurance CEOs and senior management will see greater compliance burden, but greater customer centricity may benefit policyholders.How will it help policyholders?The objective is to incentivise insurers to focus more on speedy, fair claim payouts and complaint resolution, among other metrics.What are the limitations?Parameters are too technical for policyholders to understand.No direct, unambiguous measures to curb mis-selling.Irdai may not have the bandwidth to track implementation.The flip sideNot everyone in the industry believes that more regulations will always work in policyholders’ favour. “The objective is that policyholders should ultimately benefit. The real question, however, is whether this will actually happen,” according to Sathe.For instance, can a CEO realistically be given a target that complaints must fall by a certain percentage?“There will always be situations where claims have to be rejected, say, in cases involving fraud, impersonation or other genuine concerns. Should the company avoid investigating such cases only to keep the claim rejection numbers lower? Certainly a big ‘no’,” adds Sathe.Industry officials contend that other financial sector regulators—the Reserve Bank of India and the Securities and Exchange Board of India (Sebi)—do not get into such granular details. “They lay out the guidelines and then leave it for the board to execute. Even globally, in the life insurance industry, no other country has this level of prescription,” reasons a senior industry executive who spoke on the condition of anonymity.According to him, most companies were already tracking these metrics themselves. “Also, the policyholder is unlikely to understand what such ratios actually signify, making it difficult to interpret whether it genuinely reflects an insurer’s strengths,” he points out, adding that customer experience depends on product design, distribution quality and servicing capabilities. “Insurer boards are now obliged to more explicitly link KMP compensation to policyholder outcomes and disclose the prescribed objective selfassessments. However, it would be utopian to expect immediate revolutionary shifts in service levels or fairness in service engagements,” says insurance and reinsurance expert, and former member, non-life, Irdai.Plug the loopholesEven as the insurance industry cries ‘micromanagement’ and ‘over-prescription’ that will add to the compliance burden, independent experts feel the circular, in fact, does not touch upon certain aspects that need greater supervision. “On grievances, the Irdai has not attempted anything significantly new. One of the biggest issues being discussed today is mis-selling, but there is silence on it. So, while there is an effort to encourage better behaviour, I still see it more as hand-holding than forcing performance,” says a former Irdai official who did not wish to be named.The effectiveness of new regulations will finally be determined by implementation. “Irdai does not have the bandwidth to track every case in detail. Grievance redressal and related policyholder issues could have been addressed more robustly. The new rules are a positive, but there is a considerable scope for improvement,” he says.