ICMAI readies first-of-its-kind framework for cost management and cost governance in the Indian insurance Sector

The Institute of Cost Accountants of India (ICMAI) has provided a crucial structural support to Insurance Regulatory and Development Authority of India (IRDAI)’s efforts to overhaul and rationalise the functioning of Indian insurance industry.

The statutory body that regulates and develops India’s cost and management accountancy profession has prepared a first-of-its-kind cost management, cost governance, cost disclosure and cost assurance framework (INSCOST) for the Indian insurance sector.

INSCOST becomes particularly timely in the context of the IRDAI’s public consultation paper on “Reforms for Recalibrating Economics of Insurance Distribution” issued on September 23, as it talks about cost rationalisation, expenses of management, commission structures, cost transparency and cost audit. IRDAI wants changes to distribution costs, commissions, bank bundling, mis-selling, digital insurance platforms and who can sell policies etc, and overhaul the functioning of domestic insurance industry.

“I am pleased to present this Framework at an important stage in the evolution of the Indian insurance sector. As India advances towards the vision of ‘Insurance for All by 2047’ and the broader objective of Viksit Bharat, sound cost management and cost governance will be increasingly important for efficiency, sustainability and policyholder value” ,Chittaranjan Chattopadhyay, president, ICMAI, said.

The INSCOST Framework addresses an important structural requirement by providing a dedicated and sector-specific body of guidance covering cost records, cost management, cost governance, cost disclosure and cost assurance, while also extending into strategic cost management and product profitability. The framework is the first comprehensive sub-sector differentiated work of its kind globally, covering Life, General, Health, Reinsurance and Public-Sector insurance entities.

The framework adapts the established Cost Accounting Standards, Cost Auditing Standards and Generally Accepted Cost Accounting Principles of ICMAI to the distinctive economics of insurance and aligns them with the regulatory architecture of the IRDAI. It provides guidance on cost allocation, expenses of management, claims and distribution costs, bancassurance, government-sponsored schemes, strategic cost analytics and product profitability.

According to ICMAI, effective control and governance of acquisition, procurement and other operational costs can support underwriting discipline and help insurers work towards greater efficiency and profitability in their core insurance business.

The Framework also seeks to support more cost-effective insurance products and wider insurance penetration. It positions cost not merely as an accounting number but as an important management and governance parameter, encouraging insurers to assess what drives their costs, whether processes are efficient, whether product costs are aligned with value and whether management decisions are supported by reliable cost information.

The Framework further introduces a Cost Maturity Model and phased Implementation Roadmap, enabling insurers to progressively strengthen their cost management and assurance practices in accordance with their size and readiness.

“I commend the INSCOST Framework to insurers, Boards of Directors, regulators, practitioners and the wider professional community. I believe this initiative will contribute to stronger cost governance and create meaningful opportunities for Cost and Management Accountants to support the evolving insurance sector,” Chattopadhyay said.