Published 22 June 2018, The Daily Tribune
Every now and then, beneficiaries of insurance policy, life or property, complain about the inordinate delay in the processing of their insurance claims. Delay, in this context, means payment beyond the period set out by law. Within what period then should the insurer pay the beneficiary in case the risk insured against occurs and what are the monetary consequences in case of delay ?
Under the Insurance Code, the proceeds of a life insurance policy shall be paid immediately upon maturity of the policy, unless the proceeds are payable by installments or as an annuity, in which case installments or annuities shall be paid as they become due. However, if the policy matures by the death of the insured, payment should be made within 60 days from presentation of claim and filing of proof of death. (Article 248). For property insurance, payment should be made within 30 days after proof of loss is received by insurer and ascertainment of loss or damage is made either by agreement or arbitration but if such ascertainment is not had or made within 60 days after receipt by the insurer of the proof of loss, then loss or damage shall be paid within 90 days after such receipt. Otherwise, the beneficiary shall be entitled to collect interest on the proceeds of the policy for the duration of the delay at the rate of twice the ceiling imposed by the Monetary Board of the Bangko Sentral ng Pilipinas (“BSP”) (Article 249). What is this interest rate? The Supreme Court held in Stronghold Insurance vs Pamana Island Resort Hotel and Marina Club, G.R. No. 174838, June 1, 2016, that given the provisions of the Insurance Code, which is a special law, the applicable rate of interest shall be that imposed in a loan or forbearance of money as imposed by the Bangko Sentral ng Pilipinas (BSP), even irrespective of the nature of the insurer’s liability. In the past years, this rate was at 12% per annum. However, in light of Circular No. 799 issued by the BSP on June 21, 2013 decreasing interest on loans or forbearance of money, the rate of 12% per annum has been reduced to 6% per annum from the time of the circular’s effectivity on July 1, 2013. Since the penalty is pegged at twice the legal rate, then the insurer is liable to pay 12% interest on the insurance proceeds for the duration of the delay. The monetary consequences of delay hopefully deter inordinate processing of insurance claims.
Speaking of claims settlement, here are some practical reminders to protect your interest.
The bottom line is the insured should not delay: a) filing his written notice of loss, b) submitting the proof of loss, and c) instituting the court suit in case his claim is denied, beyond the periods set out by the insurance policy. Otherwise, the insured’s right to recover may be gone forever.
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