Israeli Insurers to Refund $85 Million Over Late Payout Interest

Five Israeli insurance companies are set to return approximately NIS 310.7 million (about $85 million) to policyholders as part of settlement agreements submitted for court approval. The settlements resolve class-action lawsuits concerning the calculation of interest on insurance payouts made late.

The companies involved are Harel, The Phoenix, Clal Insurance, Migdal, and Ayalon. Harel will pay NIS 78.3 million, The Phoenix and Clal Insurance will each pay NIS 74 million, Migdal NIS 57 million, and Ayalon NIS 27.3 million. These payments are contingent on the Tel Aviv District Court's approval of the agreements.

The core dispute centered on when to begin calculating interest on delayed insurance payouts. Insurers argued interest should accrue only after all necessary documents were received, while plaintiffs contended it should start from the initial claim inquiry. The legal process spanned over 13 years and included Supreme Court hearings and a partial ruling.

Following three mediation sessions, the parties reached an agreement. A distribution mechanism will be used to allocate the funds, prioritizing larger claim amounts and longer payment delays, rather than individual calculations for each policyholder. The settlements also mandate clearer future interest calculation rules across various insurance types, including auto, life, disability, and health.

The agreements are awaiting court approval. After public announcements, individuals will have 45 days to object to the settlement or opt out. While the settlements estimate future benefits from revised interest policies, this figure is primarily for calculating legal fees and does not represent additional cash payments to policyholders.