ADR in Insurance Claims – Possible Lesson from the UK?

August 2nd, 2008 · No Comments

Daniel Schwarcz of the University of Minnesota recently posted an article to SSRN entitled, “Toward a New Approach to Resolving Consumer Insurance Disputes.” Schwarcz’s background is entirely in Insurance Law, and he is a self-confessed newcomer to ADR. He asked that I post a link to his article, with the hopes that he’ll receive feedback from folks with more of an ADR background. I’ll confess that I’ve not read more than the abstract and the first part of his article, but the abstract alone (reproduced below) is certainly intriguing enough to have put this in my to-read stack.

Abstract for Schwarcz’s article:
Much of insurance law and regulation is concerned with compensating consumers who have been wrongly denied coverage. But policyholders nonetheless have relatively few realistic options for challenging an insurer’s adverse coverage determination. Litigation is often too slow and costly for those who have recently suffered significant financial loss. Meanwhile, the alternative dispute resolution options that do exist – such as the mediation services that insurance regulators offer or the existing variants of insurance arbitration – are generally either ineffective or unavailable for most disputes. This Article proposes a new way forward by looking to the United Kingdom’s innovative Financial Ombudsman Service, which operates in parallel to the British regulator and is solely devoted to resolving consumer financial disputes. It argues that the comparative success of the Financial Ombudsman Service is primarily attributable to the ways in which it blends elements of the individual, uncoordinated insurance ADR schemes that are used in America. As such, the Article concludes that American lawmakers can significantly improve insurance compensation merely by strategically rethinking the institutional architecture of insurance dispute resolution.

Michael Moffitt