Interest on a delayed insurance claim: bank rate plus 2%
If your insurer settles outside IRDAI's timelines, you are entitled to interest from the date it received intimation of your claim. Here is the rate for this year's claims, when a motor claim becomes late, what is different on a total loss, and how to ask for the interest.
Reviewed by the BimaHaq Insurance Grievance Desk — BimaHaq's in-house insurance-grievance team — specialists in IRDAI grievance redressal, the Insurance Ombudsman process, and policyholder rights in India. · Last reviewed 2026-10-26
Short answer: if your insurer does not settle your claim within IRDAI’s timelines, you are entitled to interest at the RBI Bank Rate plus 2%, from the date the insurer received intimation of the claim until the date it pays. For motor and other general insurance, the rule covers retail policies, those designed for individuals, households and micro or small businesses. IRDAI’s 2024 Master Circular says the insurer shall pay this interest suo-moto, meaning on its own initiative. The “bank rate” is the one prevailing on 1 April of the financial year in which your claim fell due: 5.50% on 1 April 2026, so 7.50% for a claim that fell due in FY 2026-27. RBI’s change to 5.75% on 7 October 2026 does not change that figure. On a motor total loss, your insurer, not IRDAI, sets the test for when a car is written off, and if it assesses the car as an unrepairable wreck, you can choose a cash-loss settlement and keep the wreck. If the interest is missing, raise it in writing with the insurer’s grievance officer. Delay in settlement is also a ground of complaint to the Insurance Ombudsman on its own.
What does the rule say, and from when does the interest run?
For a motor own-damage claim on a retail policy, and any other claim under a retail general insurance policy, IRDAI’s Master Circular on Protection of Policyholders’ Interests, 2024 says:
“In case the claim is not settled within the specified timelines, then the claimant is entitled for interest at bank rate plus 2 percent from the date of receipt of intimation to till the date of payment. Such interest shall be paid by the insurers suo-moto.”
Three things follow from those words. The interest runs from the date the insurer received intimation of your claim, not from the date of the survey or the date of your last document. It runs until the date of payment. And the circular puts the duty to pay it on the insurer, suo-moto.
For general insurance, the rule sits in the part of the circular that applies to retail products: products designed for individuals or households, and for micro or small businesses.
The same rule, in almost the same words, covers health claims and life claims. The life version adds that the interest is paid along with the claim amount.
This page is about your insurer settling a claim under your own policy. A third-party compensation claim through the Motor Accident Claims Tribunal follows a different process, and this page does not cover it.
Which “bank rate” applies to your claim?
The rule uses the Bank Rate published by the Reserve Bank of India. IRDAI’s 2024 Regulations define it:
“"Bank Rate" means Bank rate fixed by the Reserve Bank of India (RBI) which is prevalent as on 1st day of the financial year in which the claim has fallen due.”
The Master Circular does not define “bank rate” itself. Its interpretation clause gives a word it does not define the meaning that word has in the Regulations, which is how this definition reaches the interest rule. So the figure is fixed by the first day of the financial year, not by the date you are paid, and it is not any bank’s lending rate.
Claim fell due in FY 2026-27
1 April 2026 to 31 March 2027
RBI Bank Rate on 1 April 2026: 5.50%
5.50% + 2% = 7.50%
Claim fell due in FY 2025-26
1 April 2025 to 31 March 2026
RBI Bank Rate on 1 April 2025: 6.50%
6.50% + 2% = 8.50%
RBI raised the Bank Rate to 5.75% on 7 October 2026. That does not change the 7.50% for a claim that fell due in FY 2026-27, because the definition looks only at the rate on 1 April. The same happened in FY 2025-26: RBI cut the Bank Rate to 6.25% on 9 April 2025, but the rate on 1 April 2025 was 6.50%.
The figure moves once a year. For a claim that falls due in FY 2027-28, the reference will be the Bank Rate on 1 April 2027, which was not known when this page was reviewed.
Do not mix up the Bank Rate with the repo rate. After 7 October 2026 the repo rate is 5.50% and the Bank Rate is 5.75%: two different figures, and the rule uses the Bank Rate.
When does a motor claim become late?
For motor own-damage claims, the 2024 Master Circular sets a chain of steps:
- 1.Survey. A motor loss of ₹50,000 or more must be surveyed by a registered surveyor and loss assessor.
- 2.Surveyor allocated. Within 24 hours of the claim being reported.
- 3.Survey report. Within fifteen days of allocation. The circular makes it the insurer’s duty to obtain the report on time, and if the surveyor is late, the circular says ₹500 for each day of delay “shall be paid to the claimant”, that is, to you.
- 4.Decision. The circular says: “The insurer shall decide on the claim within seven days of receipt of the survey report or after expiry of fifteen days from allocation of the claim to the surveyor whichever is earlier.”
IRDAI’s Master Circular on General Insurance Business, 2024 states the duty more simply: “The insurer shall decide on the claim within seven days of receipt of the survey report.” The longer wording in the policyholders’ circular can be read more than one way, so this page does not turn it into a single deadline date. If you rely on it, quote it as written.
The Citizens’ Charter in the same circular lists 24 hours to appoint a surveyor, 15 days for the final report after the insurer’s request, and 7 days for “communicating acceptance or rejection of the claim”.
Notice the verbs. The texts say “decide” and “communicating acceptance or rejection”. Neither states a separate number of days for paying the money once a claim is accepted. But the policyholders’ circular calls this chain the “time line for settlement” of retail general insurance claims (Part C, V.3(i)), and the General Insurance Master Circular says that any “delay in settlement of the claims beyond the above stipulated timelines” is a violation.
For every claim type’s timeline, see our guide to an insurance claim that is delayed.
Total loss or constructive total loss: who decides, and what can you choose?
IRDAI does not fix a percentage that makes a car a total loss. Under its Master Circular on General Insurance Business, 2024, each insurer’s Product Management Committee sets the criteria for treating a vehicle as a Total Loss or Constructive Total Loss (TL/CTL), including after a theft. The insurer must publish those criteria on its website, and they form part of your Customer Information Sheet.
Some insurers’ published criteria use a 75% test: IFFCO Tokio treats a vehicle as a constructive total loss (CTL), and Go Digit as a TL/CTL, when the cost of retrieving and/or repairing it exceeds 75% of its IDV. It is the insurer’s own wording, not an IRDAI figure, so check your policy’s Customer Information Sheet for the test that applies to you.
IDV, the Insured’s Declared Value, is your vehicle’s sum insured, fixed at the start of each policy period. IFFCO Tokio’s published document, for example, treats IDV as the market value throughout the policy period, without further depreciation, for TL/CTL and cash-loss claims.
The choice the insurer must offer on a wreck
Under IRDAI’s General Insurance Master Circular, if the insurer assesses your vehicle as unrepairable, and so a wreck (a “total loss” or “write-off”), it must give you the option to keep the wreck and accept a “cash loss” settlement: the IDV less the assessed value of the salvage. The salvage is valued on competitive quotes the insurer obtains, including any you submit.
If you take a cash-loss settlement, the insurer is entitled to cancel your own-damage cover from the date of damage. It can also cancel your third-party cover, after requiring you either to cancel the wreck’s road registration and give it the original proof, or to show it, in original, a third-party policy covering the wreck from the date of damage.
The General Insurance Master Circular ties this option to a vehicle assessed as unrepairable. It does not say whether the same option applies to a vehicle that could be repaired but is treated as a constructive total loss because of the cost. Your insurer’s published criteria may say.
Go Digit’s published criteria, as one example, describe the settlement as IDV less the wreck value, the excess and other deductibles. If your total-loss claim was rejected rather than delayed, see what to do when a motor insurance claim is rejected.
Which documents will the insurer ask for on a total loss?
Go Digit’s published TL/CTL criteria, as one example, list documents that include:
- the NOC from the financier, if the vehicle is financed;
- RC cancellation, or the original RC;
- a notarised consent on stamp paper;
- the original transfer form (Form 35, where the vehicle is financed);
- the vehicle keys;
- the FASTag statement; and
- the FIR.
Other insurers’ lists may differ.
What the 2024 Master Circular says about documents: “No claim shall be rejected or closed for want of documents or for delayed intimation of claim.” It also says “The customer will submit only those documents that are directly related to the claim”, and gives examples such as the claim form, driving licence, permit, fitness, FIR, untraced report and repair bills (where cashless is not available).
And an insurer cannot repudiate a claim, in full or in part, because of a delay on your part that did not increase the assessed loss, or for a breach of a warranty or condition that has nothing to do with the loss.
The RC is dealt with in a separate instruction. IRDAI’s 2019 circular on total-loss vehicle documents (IRDAI/NL/CIR/MOTOD/118/07/2019, 25 July 2019), which the General Insurance Master Circular keeps in force, advises all insurers “to ensure cancellation of Certificate of Registration (RC) of the vehicle in case of total loss claim settlement”. Its reason: wrecks were being sold to scrap dealers without the RC being cancelled, and their papers misused to give stolen vehicles a new identity. It also quotes section 55 of the Motor Vehicles Act, 1988, under which the owner of a vehicle that has been destroyed, or made permanently incapable of use, must report that to the registering authority “within fourteen days or as soon as may be” and forward the RC.
What the 2024 circular does not settle: whether title-transfer papers, such as a financier’s NOC or a transfer form, count as “directly related to the claim”. And neither circular says whether the time you take to produce any of these papers affects the interest.
What could the interest come to?
Hypothetical: invented figures, not a real case
Suppose the insurer received intimation of a car’s total loss on 1 June 2026, the claim was not settled within the timelines, and the insurer finally paid ₹3,65,000 on 30 August 2026. Both dates fall in FY 2026-27, so the rate is 7.50% (5.50% on 1 April 2026, plus 2%).
The method is our assumption, not the circular’s. The circular does not say whether the interest is simple or compound, which day-count to use, or which amount it runs on. For this example we assume simple interest, on the amount finally paid, for the actual number of days from intimation to payment, over a 365-day year.
- 1. Days from 1 June 2026 to 30 August 2026: 90.
- 2. A year’s interest at 7.50% on ₹3,65,000: ₹27,375.
- 3. One day’s interest: ₹27,375 ÷ 365 = ₹75.
- 4. Interest for 90 days: ₹75 × 90 = ₹6,750.
Change any assumption, such as compound interest, a 360-day year, or a different amount like the IDV less salvage, and the figure changes. If your insurer’s figure is different, ask it in writing how it worked the figure out.
What do the rules not say?
The interest rule is two short sentences. Several things a calculation needs are not in it, and this page does not fill them in:
- Simple or compound. The circular does not say.
- Day-count. It does not say whether a year counts as 365 days or 360.
- The amount it runs on. It does not say whether that is the amount finally paid, the amount the insurer admitted, or the IDV less salvage.
- Your own delays. It does not say whether the interest pauses while the insurer waits for something from you, such as the RC or a financier’s NOC.
- When a claim “has fallen due”. The Regulations use the phrase but do not define it. If your intimation and your settlement fall in different financial years, the text does not settle which year’s Bank Rate applies.
- “Not settled”: decided, or paid? The motor timeline is a time to decide, and the texts state no separate time to pay. But the circular itself calls that timeline the “time line for settlement” (Part C, V.3(i)), and the General Insurance Master Circular calls delay “in settlement” beyond it a violation. Neither text says what happens when a claim is decided on time and paid late.
- The “whichever is earlier” clause. Its reading is not settled, which is why this page quotes it rather than counting days from it.
How do you claim the interest?
Write to the insurer’s Grievance Redressal Officer. Give your claim number, the date the insurer received intimation, and the date it paid (or that it has not paid). Ask for interest at bank rate plus 2% under IRDAI’s 2024 Master Circular: 7.50% if the claim fell due in FY 2026-27. Keep a copy and note the date you sent it.
The circular requires the insurer to acknowledge a complaint immediately and resolve it within 14 days, giving reasons tied to the policy terms if it does not accept the complaint. Our complaint letter templates can help you set it out.
Register it on Bima Bharosa, if you choose. You also have the option to register the complaint online on IRDAI’s Bima Bharosa portal. It is optional: the Ombudsman Rules do not require it. IRDAI’s call centre is on toll-free 155255 or 1800 4254 732, and at complaints@irdai.gov.in. An insurer may not discourage you from taking a grievance to IRDAI.
Go to the Insurance Ombudsman. You can go once the insurer has rejected your written representation, replied in a way you are not satisfied with, or not replied within one month of receiving it. You have one year to file, and the date the year runs from depends on which of those happened. The Ombudsman charges no fee.
See how to file an Insurance Ombudsman complaint, or start from the full escalation ladder.
Can the Insurance Ombudsman award the interest?
Delay is a ground of complaint on its own. Rule 13(1)(a) of the Insurance Ombudsman Rules, 2017 covers “delay in settlement of claims, beyond the time specified in the regulations”. Rule 13(1)(i) also covers non-observance of an IRDAI circular, insofar as it relates to the listed grounds.
An award carries its own interest rule. Rule 17(7) says:
“The complainant shall be entitled to such interest at a rate per annum as specified in the regulations, framed under the Insurance Regulatory and Development Authority of India Act, 1999, from the date the claim ought to have been settled under the regulations, till the date of payment of the amount awarded by the Ombudsman.”
The Rule itself names no number. IRDAI’s Master Circular reads it as penal interest at 2 percent above bank rate from the date the claim ought to have been settled.
Note the two start dates. The circular’s interest runs from the date the insurer received intimation. Rule 17(7) interest runs from the date the claim ought to have been settled. They are different dates, and the texts do not say how an Ombudsman reconciles them.
The award binds the insurer, which must comply within 30 days of receiving it. IRDAI’s Master Circular adds that if it does not, ₹5,000 for each day of delay is payable to you, on top of the penal interest, unless the insurer chooses to appeal against the award within those 30 days. In that case, the insurer must tell you.
The Ombudsman cannot award more than ₹50 lakh, including relevant expenses (Rule 17(3) proviso (ii)).
One more rule: the Ombudsman cannot take up a complaint on a subject already pending before, or decided by, a court, consumer forum or arbitrator. If you want the Ombudsman to hear it, go there before you take the same matter to a court, a consumer commission or an arbitrator.
Want help preparing the grievance?
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- Bima Bharosa Filing. We prepare your Bima Bharosa grievance, the supporting document set and the complaint category, and assist you step by step while you register it on IRDAI’s portal.
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Frequently asked
What interest does an insurer owe if it settles my claim late?
Interest at the RBI Bank Rate plus 2%, from the date the insurer received intimation of your claim until the date it pays. The rule is in IRDAI's Master Circular on Protection of Policyholders' Interests, 2024 (IRDAI/PP&GR/CIR/MISC/117/9/2024), which also says the insurer shall pay this interest suo-moto, on its own initiative. It covers motor own-damage and other claims under retail general insurance policies (those designed for individuals, households and micro or small businesses), and the circular states the same rule for health and life claims.
What is the interest rate for a claim that fell due in FY 2026-27?
7.50%. The rule uses the RBI Bank Rate on the first day of the financial year in which the claim fell due, and on 1 April 2026 that was 5.50%. RBI raised the Bank Rate to 5.75% on 7 October 2026, but that does not change the figure for a claim that fell due in FY 2026-27. For a claim that fell due in FY 2025-26 the figure is 8.50% (6.50% on 1 April 2025, plus 2%).
Does the interest only start once I have handed over my last document?
No. Under IRDAI's 2024 Master Circular the interest runs from the date the insurer received intimation of the claim. Starting the interest from the last document was the general insurance rule in the IRDAI (Protection of Policyholders' Interests) Regulations, 2017, which were repealed from 1 April 2024 and no longer apply. The Master Circular is dated 5 September 2024; for a claim that fell due between 1 April and 5 September 2024, the texts read for this page do not say which rule governed it.
Who decides whether my car is a total loss?
Your insurer, not IRDAI. Under IRDAI's Master Circular on General Insurance Business, 2024, each insurer's Product Management Committee sets its Total Loss and Constructive Total Loss criteria and publishes them on its website and in the Customer Information Sheet. Some insurers' published criteria use a 75% test: IFFCO Tokio's treats a car as a constructive total loss, and Go Digit's as a total or constructive total loss, when the cost of retrieval and/or repair exceeds 75% of its IDV. Check your own Customer Information Sheet. If the insurer assesses the car as unrepairable, a wreck, it must also offer you a cash-loss settlement: you keep the wreck and receive the IDV less the assessed value of the salvage. If you take it, the insurer may cancel your own-damage cover from the date of damage, and may cancel your third-party cover after requiring you to cancel the wreck's registration or to show third-party cover on the wreck.
Is the late-payment interest simple or compound, and on which amount?
The circular does not say. It does not say whether the interest is simple or compound, which day-count to use, or whether it runs on the amount finally paid, the amount admitted, or the IDV less salvage. Any calculation, including the example on this page, has to assume a method.
If I was slow to hand over the RC or my financier's NOC, does the interest stop?
The 2024 circular does not say either way. It neither says the interest pauses for a delay on the claimant's side, nor says the interest keeps running regardless of one. IRDAI's 2019 circular telling insurers to ensure the RC is cancelled on a total loss settlement does not deal with interest either.
Can the Insurance Ombudsman award interest on a delayed claim?
Delay in settling a claim beyond the time in the regulations is a ground of complaint on its own under Rule 13(1)(a) of the Insurance Ombudsman Rules, 2017. On an award, Rule 17(7) gives interest at a rate per annum specified in the regulations, from the date the claim ought to have been settled until the award is paid. The Rule names no number; IRDAI's Master Circular reads it as 2 percent above bank rate. That start date differs from the circular's intimation date. The Ombudsman cannot award more than ₹50 lakh, including relevant expenses.
Do I have to complain on Bima Bharosa before going to the Ombudsman?
No. The Insurance Ombudsman Rules require a written representation to the insurer first, and then a rejection, a reply you are not satisfied with, or no reply within one month of the insurer receiving it. Registering the complaint on IRDAI's Bima Bharosa portal is an option, not a precondition.
What this page relies on
Read at source on 26 October 2026. Follow the links and read them yourself.
- IRDAI Master Circular on Protection of Policyholders' Interests, 2024
IRDAI/PP&GR/CIR/MISC/117/9/2024, 5 September 2024. Interest on late claims: Section 1, Part C, V.3(ii) (Part B for health, Part A for life). Motor survey timeline: Part C, V.4. Grievances: Part C, VI.
- IRDAI (Protection of Policyholders' Interests, Operations and Allied Matters of Insurers) Regulations, 2024
F. No. IRDAI/Reg/11/205/2024, dated 20 March 2024 and published in the Gazette on 22 March 2024, in force from 1 April 2024. "Bank Rate" defined in regulation 5(3); the 2017 Regulations repealed by regulation 58(1)(g).
- IRDAI Master Circular on General Insurance Business, 2024
IRDAI/NL/MSTCIR/MISC/90/06/2024, 11 June 2024 (reference as cited in the PPHI Master Circular). Total loss criteria, the cash-loss option and what follows from it: Chapter V, I. Motor Insurance, para 5. Retail claim timelines: Chapter I, para 10. Circulars kept in force: Annexure A.
- IRDAI circular: Misuse of Total Loss Accident Vehicle Documents over Stolen Vehicles
IRDAI/NL/CIR/MOTOD/118/07/2019, 25 July 2019. Kept in force by the General Insurance Master Circular, 2024 (Annexure A, item 5). Paragraph 4: cancelling the RC on a total loss claim settlement; paragraph 3 quotes section 55 of the Motor Vehicles Act, 1988.
- Insurance Ombudsman Rules, 2017 (as amended up to 9 November 2023)
G.S.R. 413(E), 25 April 2017, as amended by G.S.R. 785(E), 17 August 2018; G.S.R. 147(E), 2 March 2021; G.S.R. 334(E), 18 May 2021; and G.S.R. 828(E), 9 November 2023. Grounds: rule 13(1)(a) and (i); clause (i) and rule 14(3)(a) are in the form substituted by G.S.R. 147(E). Preconditions: rule 14(3). Forum bar: rule 14(5). Award cap: rule 17(3) proviso (ii). Award interest: rule 17(7).
- Reserve Bank of India — Monetary Policy Committee, 8 April 2026
Press Release 2026-2027/36: the Bank Rate remains at 5.50 per cent (also 6 February 2026, Press Release 2025-2026/2053).
- Reserve Bank of India — Monetary Policy Committee, February 2025
Minutes, Press Release 2024-2025/2219, 21 February 2025: the Bank Rate to 6.50 per cent. Cut to 6.25 per cent on 9 April 2025 (Press Release 2025-2026/61).
- Reserve Bank of India — Monetary Policy Committee, 7 October 2026
Press Release 2026-2027/1264: the Bank Rate at 5.75 per cent. This is RBI's rate today, not the reference for a claim that fell due in FY 2026-27.
- Go Digit, Criteria to determine Total Loss / Constructive Total Loss (an insurer's wording, not regulation)
No printed date; PDF metadata 21 October 2024. The 75% TL/CTL test, the settlement basis and the document list.
- IFFCO Tokio, IDV Depreciation Table (an insurer's wording, not regulation)
No printed date; PDF metadata 25 April 2025. The 75% CTL test, and IDV as the market value for TL/CTL and cash-loss claims.
- IRDAI (Protection of Policyholders' Interests) Regulations, 2017 — REPEALED
F. No. IRDAI/Reg/8/145/2017, 22 June 2017. Repealed from 1 April 2024. Cited on this page as history only.
This guide is general information about the insurance-grievance process in India, not legal advice, and figures (timelines, monetary limits, jurisdiction) can change — verify against the official sources linked above before you rely on them.