Claim settlement and grievance redressal related performance will determine the incentives of top executives of insurance companies: IRDA

Delayed claim settlements, unresolved complaints, and subpar customer service have long been ongoing issues in the insurance sector, despite policyholders paying premiums for years.

Now, in a significant move focused on policyholders, the Insurance Regulatory and Development Authority of India (IRDAI) has linked the pay and incentives of top insurance company executives to parameters such as claim settlement responsiveness, grievance redressal, and product performance.

“Traditionally, insurance executives were rewarded based on growth and profits. IRDAI’s new circular changes all that by tying a part of their variable pay to things that matter to customers such as how quickly claims get settled, how complaints get addressed, how products actually perform,” says Trupti Balasubramaniam - CEO & Principal Officer, Probus.


Also read: Insurer denies Rs 20 lakh life insurance claim over diabetes non-disclosure; woman fights back and wins; here’s why

What parameters will decide KMP remuneration?

For FY 2026-27, IRDAI has made six parameters mandatory for assessing KMP performance and determining variable pay or incentives. These include:

• Financial soundness and improvements
• Product performance and improvements
• Claim responsiveness and improvements
• Grievance redressal and improvements
• Implementation of Indian Accounting Standards (Ind AS)
• Removal of dark patterns in insurer and distributor interactions

The regulator has specified that these six parameters, together, must carry a 50% weightage in the performance assessment of KMPs. Out of this:

• Implementation of Ind AS will carry 10% weightage
• Removal of dark patterns will carry 10% weightage

The insurer’s board may decide the remaining weightage for the other four parameters.

Insurers must publicly disclose claim settlement performance

One of the biggest changes for policyholders is the mandatory disclosure of claim responsiveness data.

Insurers will now have to disclose how many claims are settled within 15 days, 30 days, 60 days and beyond, along with details of claims paid fully, partially, repudiated, rejected or remaining unsettled.

It’s important to note that IRDAI has made it clear that claim settlement timelines will be counted from the date the claim is filed and not from the date all documents are submitted. The regulator said facilitating documentation should be the insurer’s responsibility.

Also read: Latest claim settlement ratio of health and general insurers released by IRDAI in 2026: Niva, Acko, Aditya Birla, Galaxy lead; Shriram, IFFCO Tokio fall below 90%

Grievance redressal performance to become public

The regulator has also tightened norms around grievance handling.

Insurers will have to publicly disclose grievance redressal performance, including the number of grievances resolved within specified timelines and pending unresolved complaints.

IRDAI clarified that complaints related to policy sale, services by insurer and /or by distribution channel, delay or inadequacy of claim servicing or settlement, delay in pre or post-treatment authorization in case of health insurance, and delay in assessment of loss in case of motor or property insurance must be treated as grievances.

An inquiry or service request would not fall within the definition of “Grievance” or “Complaint”.

Also read: Top 10 insurers with highest number of complaints in handling health insurance; Star, Care and Niva among top 3

Product performance disclosures also mandated

IRDAI has also directed insurers to publicly disclose product-level information for products contributing 90% of new or renewal premium collections.

Products’ performance parameters will detail features, inclusion & exclusions, FAQs, premium rate increase, sale and exit performance and returns.

Another major addition is the focus on removal of “dark patterns” in insurer and distributor interactions with customers.

Public disclosures to begin from FY 2026-27

IRDAI has instructed insurers to disclose:

• Financial soundness data quarterly
• Claim responsiveness, grievance handling and product performance data monthly

The regulator has also said these disclosures must be easy to access and should not require visitors to share personal details such as phone numbers for viewing the information.

Why this move is important for policyholders

Policyholders have largely relied on advertisements, premium costs and broad claim settlement ratios while choosing an insurer. However, these metrics often do not fully reflect the actual customer experience during claim settlement or grievance handling.

“The new disclosure requirements can improve transparency for policyholders. Insurers will now be required to publicly disclose key performance indicators related to claims, grievances, product performance and related improvements in an easy-to-understand manner. This can help customers make more informed decisions while comparing insurers and evaluating service standards beyond just pricing or product features”, says Arun Ramamurthy, Co-founder, Staywell.Health.

Also read: Less than 24 hours in Hospital? Know about health insurance coverage for day care treatments, surgeries, and emergency procedures

“IRDAI has now asked insurers to openly publish data on claims, grievances, products, and retention on their websites, no sign-ups, no name and mobile number sharing needed. So, customers now have something tangible to check out while shortlisting an insurer rather than just premiums,” says Balasubramaniam.

In the case of the health and motor insurance buyers, that insight will matter greatly.

You will soon have an idea of what percentage of claims get settled fast, the age of unresolved grievances, the performance of products over the years. That kind of information, updated regularly and made available openly, will empower customers in deciding what coverage to buy, he adds.