Imposition of Strict Penal Interest Rates on Delayed Claim Payouts

The regulator has tightened the screws on insurers who deliberately stall or delay the payout of mutually agreed or court-ordered claim funds. According to the updated claims settlement circulars, once a claim has been officially approved or a legal dispute has been resolved in favour of the policyholder, the insurer must disburse the funds within a strict 30-day window. Failure to meet this deadline triggers a mandatory penalty: the insurer must pay penal interest to the policyholder at a rate that sits 2% above the prevailing bank lending rate.

This regulation ensures that insurance companies cannot arbitrarily hold on to claim money to boost their own internal investment yields. It turns delays into an active financial loss for the insurer, ensuring that individual policyholders receive their rightful capital precisely when they need it most.