The shift, outlined in a recent consultation paper, introduces frameworks such as Ind AS 117 Insurance Contracts and Ind AS 109 Financial Instruments, bringing insurer reporting closer to global benchmarks like IFRS 17 Insurance Contracts already adopted in several markets.
What changes from today
The transition marks a structural change in how insurers report profits, costs and liabilities in their financial statements.
Under the new framework, insurers will no longer recognise certain costs—such as commissions and acquisition expenses—upfront. Instead, these will be spread over the life of the policy. Similarly, future claim liabilities will now be discounted to reflect the time value of money, replacing the earlier undiscounted approach.
A key addition is the Contractual Service Margin (CSM), which represents unearned profits from insurance contracts. This will be recognised gradually over the policy period, aligning revenue recognition with the delivery of insurance services.
These changes are expected to alter the timing and presentation of profitability, even if the underlying business economics remain unchanged.
No direct impact on policyholders
Despite the accounting overhaul, policyholders are unlikely to see any immediate change.
The shift is limited to financial reporting and does not affect policy terms, benefits or contractual obligations. However, improved disclosures and market-linked valuation of liabilities may provide clearer insight into insurers’ financial health over time.
Push for transparency and comparability
The regulator expects the move to enhance transparency, consistency and comparability across the sector. With standardised reporting, investors and analysts may find it easier to assess insurers’ performance, risks and long-term profitability.
The alignment with global norms is also seen as a step toward improving the sector’s appeal to international investors, as financial statements become more comparable with global peers.
Transition phase begins
From this financial year, insurers are expected to begin reporting under the Ind AS framework, alongside existing accounting standards during the transition phase. This parallel reporting is aimed at helping regulators evaluate the impact of the shift and ensure a smoother adoption process.
