Under the Insurance Act of Bangladesh, 2010, policyholders are legally entitled to receive interest on insurance claims that are not settled within the prescribed timeframe. Section 72 of the Act explicitly mandates that insurance companies must pay interest on claims that are delayed beyond a certain period. This provision aims to protect the rights of policyholders while discouraging unnecessary delays in claim settlements.
When Does Interest Apply?
Interest becomes applicable under the following conditions:
The claim is due for payment under a valid insurance policy.
The claimant has submitted all required documents and information correctly and completely.
The insurance company fails to settle the claim within 90 days from the date it becomes payable or from the completion of all necessary formalities.
In such cases, insurers are legally obliged to pay interest on the delayed principal amount, unless they can demonstrate that the delay was caused by circumstances beyond their control.
Interest Rate and Calculation
The interest is calculated on a monthly basis and is set at 5% above the prevailing bank interest rate. This mechanism not only incentivises insurance companies to process claims promptly but also ensures that policyholders receive fair compensation for any undue delay. For example, if the standard bank interest rate is 6% and a claim is delayed by four months, the effective interest rate would be 11% (6% + 5%), calculated monthly until the claim is fully settled.
Scope of Application
This provision applies to both life and general (non-life) insurance claims, provided the claim is undisputed and all necessary documentation has been submitted. The law is designed to safeguard the legal rights of policyholders while holding insurers accountable for timely settlements.
Key Takeaways
Delays exceeding 90 days constitute a violation of the law.
Insurers are required to pay interest except in cases of unforeseen delays.
Interest is calculated monthly at 5% above the current bank rate.
Timely claim settlement builds trust and confidence among policyholders.
The legislation ensures a fair and transparent insurance environment in Bangladesh, protecting policyholders from administrative delays or procedural bottlenecks while promoting accountability within the insurance sector.