Insurers' Arbitration Use Rising

NU Online News Service March 11, 12:39 p.m.EST? Property-casualty insurance companies andself-insureds significantly increased their use of arbitration toresolve inter-company claims disputes last year, according toArbitration Forums, Inc. of Tampa, Fla.

AF said that at the same time, dollar savings realized by usingarbitration also grew.

AF resolved more than $1.4 billion in inter-company claimsdisputes in 2001, up 13.68 percent from 2000, said D. Kay Smith,chief executive officer of AF. The company describes itself as thelargest nonprofit U.S. provider of inter-insurance disputeresolution services.

Ms. Smith said a study the company did found for every dollar acompany spends on inter-company arbitration, the return oninvestment in 2001 was $20.80, up from $19.69 in 2000.

Cost items reviewed in the study included the salary of theclaims handler, file preparation time and copying and mailingcosts.

"By choosing arbitration over litigation as the means ofresolving property and casualty claims, insurers are savingsignificant expense dollars as well as time and gaining acompetitive edge over those who elect to litigate," she said.

Ms. Smith said disputes leading to arbitration typically arisewhen insurance or self-insured companies believe their insureds arenot at fault or if they disagree as to the percentage of liabilityor the amount of damages. More than 80 percent of inter-companyarbitration disputes involve auto collisions, according to Ms.Smith.

Use of the Internet and e-mail, she said, further speeds thearbitration process. AF said it now offers an E-Speed FilingProgram providing electronic filing for small-dollar auto liabilityand damage disputes. The filing fee for the program recently wasreduced to $45 from $100, the company said.

But, many insurers and self-insureds still are not taking fulladvantage of the savings provided by arbitration, according to Ms.Smith.

For example, she said many are taking too long to initiate thearbitration process. The average number of days from date of lossto date of arbitration filing is 335 days for AF's programs. AFfound the most efficient insurers have cut that time down to 240days, while others take as long as 919 days.

AF counts a membership of more than 3,000 insurers andself-insureds nationwide.