Arbitration Group Says Self Insureds Need Schooling
NU Online News Service, June 17, 12:56 p.m. EDT?Self-insured companies are improving their subrogation recovery rates and reducing costs through increased use of inter-company arbitration, according to data released yesterday by Arbitration Forums, Inc., in Tampa, Fla.
The non-profit group said it thought usage would increase even more if self-insureds had more knowledge of the arbitration process.
Last year, self-insured membership in AF's programs grew by nearly 25 percent from 1,667 members to 2,055. At the same time, arbitration filings by self-insureds grew by nearly 27 percent, AF said.
AF said a primary benefit that self-insureds are realizing by participating in arbitration is a reduction in the rate of "abandoned" subrogation claims. Low-to-medium dollar subrogation claims are abandoned when the other party denies the claim and value does not justify the expense of litigation, AF noted.
As signatories to AF's programs, more than 3,500 insurance companies and self-insureds are required to arbitrate a settlement. The result is a significant cut in the abandoned subrogation claim rate for self-insureds, AF said.
Arbitration for self-insureds also protects them from litigation, AF pointed out. Once an agreement is signed, all participating companies must forego litigation and use AF's arbitration process to resolve loss disputes related to each program.
However, while interest in arbitration by self-insureds has grown, utilization of arbitration services by self-insureds still lags far behind traditional insurance carriers, said D. Kay Smith, chief executive officer of AF.
"Unlike traditional insurance companies, many self-insureds do not have subrogation units dedicated to recover claims dollars who are well aware of the benefits of arbitration," said Ms. Smith.
More training and education of self-insureds on arbitration and how easy the process works, Ms. Smith said, would generate greater utilization.
AF, she said, will be working individually with its self-insured members to determine what type of training tools they need to help increase their participation in arbitration programs.
AF, which describes itself as the nation's largest not-for-profit provider of inter-company insurance dispute resolution services, said it resolved nearly $1.8 billion in inter-company subrogation claims last year.
The firm said only a small amount of its activity involved self-insured companies. AF said it did a study that found that for every dollar a company spends on inter-company arbitration, the return on investment is $20.63.
"Self-insureds can cut expenses, increase subrogation recovery, and improve their bottom line[s] by capitalizing on the opportunities offered by arbitration," Ms. Smith said.
She also noted that the new E-Speed filing program at AF offers high-speed, paperless electronic filing for small-dollar auto liability and damage disputes, which is of interest to self-insureds.
AF, a nonprofit provider, involves no court costs, legal fees or membership fees. AF's filing fees range from $40-65, the organization said.
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