Under the Insurance Act, 2010, policyholders in Bangladesh are legally entitled to interest if their insurance claims are not settled promptly. Section 72 of the Act clearly stipulates that insurers must pay interest on claims delayed beyond a certain period, ensuring policyholders’ rights are protected and discouraging undue delays.
When is Interest Payable?
Interest becomes applicable when:
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A claim is due for payment under a valid insurance policy, and
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The claimant has submitted all required documents and information correctly and completely, and
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The insurer fails to settle the claim within 90 days of the claim becoming payable or from the completion of all formalities, whichever occurs later.
In such cases, the insurance company is legally obliged to pay interest on the outstanding claim amount, unless it can demonstrate that the delay occurred due to circumstances beyond its control.
Rate of Interest
Interest is calculated on a monthly basis. The rate is set at 5% above the prevailing bank rate. This ensures that insurers remain incentivised to settle claims promptly, while claimants are compensated fairly for delays.
For example, if the standard bank rate is 6% and the claim settlement is delayed by four months, the effective interest rate would be 11% (6% + 5%), applied monthly on the claim amount until the payment is made.
Applicability
This provision applies to both life insurance and general (non-life) insurance claims, provided the claims are undisputed and all necessary documentation has been submitted. It is designed to uphold the legal rights of policyholders and to enforce accountability on the part of insurers.
Key Takeaways
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Delays beyond 90 days in settling claims constitute a violation of the Insurance Act, 2010.
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Insurers are legally compelled to pay interest on delayed claims, unless delays are uncontrollable.
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The interest rate is 5% above the prevailing bank rate, calculated monthly.
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This rule promotes timely claim settlements, protecting policyholders and enhancing trust in the insurance system.
By codifying this obligation, the law aims to create a fairer insurance environment in Bangladesh, ensuring policyholders are not unduly disadvantaged by administrative delays or procedural inefficiencies.