What Does Arbitration Mean?
Arbitration is the process of using a third party to settle an insurance dispute between an insurer and a policyholder. Arbitration is often preferred by insurance companies and policyholders because it can be cheaper and less time consuming than trying to resolve the issue in court with lawyers and a judge or jury.
Insuranceopedia Explains Arbitration
Disputes can often arise between an insurance company and a policyholder if the insurance company attempts to pay out a claim for a value that is less than what the policyholder was expecting. For example, if a policyholder files a claim after an auto accident, the insurer may try to pay out the claim for less money than the policyholder believed the claim was worth. In this case, arbitration could be used to have the third party declare what the claim was worth, and thus settle the issue.