An Uptick In Self-Insured Arbitration Use
NU Online News Service, June 14, 4:25 p.m. EDT?Self-insured companies have increased their use of inter-company arbitration to settle claims, but still lag behind traditional carriers, according to Arbitration Forums, Inc.[@@]
Tampa, Fla.-based AF said cases filed by self-insured membership in its programs increased by more than 12 percent in the first quarter.
The company said self-insureds using arbitration have seen a reduction in the rate of "abandoned" subrogation claims. AF said these low-to-medium dollar subrogation claims are abandoned when the other party denies the claim and the dollars involved in the loss do not justify the expense of litigation.
As signatories to AF's programs, more than 3,500 insurance companies and self-insureds are required to arbitrate when a settlement cannot be reached. The result is a significant cut in the abandoned subrogation claim rate for self-insureds, the firm said.
AF said another benefit of arbitration for self-insureds is protection from litigation. 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.
This means, AF said, that there are 3,500 other carriers and self-insured entities that cannot sue them for unresolved losses that fall under the jurisdiction of the arbitration program for which the agreement is signed.
In spite of increasing interest in arbitration by self-insureds, their use still lags far behind traditional insurance carriers, said AF's chief executive officer, D. Kay Smith.
"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.
She suggested that more training and education of self-insureds on arbitration, and how easy the process works, would generate greater utilization.
AF said it 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 said it resolved $1.8 billion in inter-company subrogation claims last year. However, only a small portion of this dollar amount involved self-insured companies.
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