Arbitration Proven Effective to Resolve Inter-Insurance Disputes

The use of arbitration by property/casualty insurance companies and self-insureds to resolve inter-company claims disputes increased significantly in 2001, according to Arbitration Forums (AF).

At the same time, dollar savings realized by using arbitration also grew.

AF, a national nonprofit provider of inter-insurance dispute resolution services, resolved more tan $1.4 billion in inter-company claims disputes in 2001, up 13.68 percent from 2000, D. Kay Smith, CEO of AF, said.

An AF study found that for every dollar a company spends on inter-company arbitration, the return investment in 2001 was $20.80, up from $19.69 in 2000, she said.

Cost items reviewed in the study included the salary of the claims handler, file preparation time and copying and mailing costs.

“By choosing arbitration over litigation as the means of resolving property and casualty claims, insurers are saving significant expense dollars as well as time and gaining a competitive edge over those who elect to litigate,” she said.

Smith explained that disputes leading to arbitration typically arise when insurance or self-insured companies believe their insureds are not at fault or if they disagree as to the percentage of liability or the amount of damages. More than 80 percent of inter-company arbitration disputes involve auto collisions, according to Smith.

She also pointed out that the use of the Internet and e-mail further speeds the arbitration process. The new E-Speed Filing Program at AF offers high-speed electronic filing for small-dollar auto liability and damage disputes. The filing fee for the program was reduced recently from $100 to $45.

Still, Smith observed, many insurers and self-insureds are not taking full advantage of the savings provided by arbitration. For example, many are taking too long to initiate the arbitration process, said Smith. The average number of days from date of loss to date of arbitration filing is 335 days for AF’s programs. AF found the most efficient insurers have cut that time down to 240 days, while others taking as long as 919 days.