Israeli Insurers to Pay Over $80 Million in Late Payout Interest Settlements

Five major Israeli insurance companies are set to pay over 310 million shekels (approximately $83 million) to policyholders as part of class-action lawsuit settlements. The companies, Harel, The Phoenix, Clal, Migdal, and Ayalon, have reached agreements to resolve a long-standing dispute over interest owed on delayed insurance payouts. The core issue revolved around when the 30-day period for calculating interest on late payments begins, with insurers arguing it started after all necessary documentation was received, while plaintiffs contended it began upon claim submission.

The settlements, filed with the Tel Aviv District Court, address past due interest totaling around 310.7 million shekels. Additionally, the companies have agreed to change their future interest calculation methods, a change estimated to be worth an additional 214.8 million shekels in future benefits. The total value of the settlements, combining past and future adjustments, exceeds half a billion shekels.

Policyholders who received late payments between 2011 and 2023 and were shortchanged on the accrued interest may be eligible for a payout. The distribution will be based on the size of the insurance payout and the duration of the delay. Harel is expected to pay the largest share, approximately 78.3 million shekels, followed by The Phoenix and Clal at about 74.05 million shekels each, Migdal at 56.95 million shekels, and Ayalon at 27.34 million shekels.

The process, which has spanned over 13 years and involved multiple court proceedings and mediation attempts, is not yet finalized. The court must approve the agreements, after which eligible policyholders will be notified. To avoid requiring individual policyholders to file claims, a joint accountant will be appointed to distribute the funds directly to beneficiaries' bank accounts based on court orders.

This settlement follows a similar large-scale agreement in May, where insurers were ordered to return hundreds of millions of shekels in relation to "policy factor" issues. Both cases highlight how seemingly small amounts per policyholder can accumulate into substantial sums over time when multiplied across millions of policies and extended periods. The settlements also include provisions for legal fees and compensation for the representative plaintiffs, totaling over 65 million shekels before VAT, subject to court approval. A portion of undistributed funds will be directed to charities supporting reservist soldiers.