How to get a handle on claims costs and complications with automated arbitration

March 31, 2020 / 4 min read

Recent Association of British Insurers (ABI) research found motor insurers are now paying out more than £12 million for repairs and £9 million for bodily injury claims every day. This is without taking into account the now large volumes of injury claims being escalated to the courts: the latest MoJ data indicates personal injury accounts for 91 percent of all unspecified money claims being contested.

The impact of the UK personal injury reforms, now set to take effect in August, is uncertain. The small claims track limit is expected to increase from £1,000 to £5,000; and it’s highly likely this will cause shifts in the costs of settling personal injury claims, claims volumes, and types of claims filed. We may also see average claim severity increase.

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PI reforms could drive new shifts in claim trends

If the personal injury reforms do push claims beyond the current threshold, it would make compensating insurers liable for claimants’ legal costs at a time when key decision makers in claims operations are under increasing pressure to both minimise loss adjustment expenses and improve operational efficiency. As the volume and complexity of claims increase, so does the challenge to limit claims indemnity spend.

Litigation continues to be a source of expense and uncertainty

Claims that involve both personal injury and vehicle or other property damage can be complex, potentially spiralling out of control due to the time required to manage the claim, assign liability, and then fully resolve it. In situations when liability cannot be agreed upon by all parties, court action is likely-a process currently being made worse by chronic court backlogs. This has led to insurers and claimants being subjected to long waiting times for resolution and confirmation of liability and resulting pay-outs, while management and legal costs mount in the background.

Independent binding arbitration can ease resolution processes

Here’s where arbitration has a key role to play. Pursuing a resolution through binding (as opposed to non-binding) arbitration allows insurers, claimants, and designated representatives to work in accordance with standard time frames, prepare evidence, and communicate updates to the arbitrator ahead of their review.[i]

Also, by resolving disputes this way, there are no additional costs associated with unresolved cases for insurers; and claimants benefit from a timely, evidence-based outcome from an independent third party. However, insurers must ensure that the issues affecting litigation don’t become associated with arbitration. Automation technology can drive this process – aiding insurers throughout the life of a claim.

Gain greater business insights using automated ADR

Insurers that replace manual alternative dispute resolution (ADR) protocols and escalation processes in favour of a dedicated, automated ADR platform will unlock benefits for themselves, claimants, and arbitrators through real-time case updates and exchange of relevant claims information.

Platforms with extensive automation remove the delays, inefficiencies, and increased costs that come with claims litigation. For insurers, adopting a dedicated platform also has the wider benefit of ensuring that a wealth of previously unrecorded or siloed information can be captured to provide valuable business insights into claim outcomes. This enhanced insight will provide claims handlers with decision support for their litigation management strategies, even if claim trends change over time.

Increase certainty, reduce costs, and unlock ‘right-touch’ experiences

Resolution through arbitration means both claimants and insurers gain the security of a fixed resolution date, a fully independent and evidence-based judgement on liability, and the chance to avoid potentially high court costs.

Moving arbitration to a dedicated platform with advanced automation capabilities is an essential step towards end-to-end automation and ‘right-touch’ claims. This streamlines the process of settling meritorious claims by minimising manual touches and activities while monitoring for the ever-present threat of fraudulent claims.

Unlocking more insights from third-party integration

Further, the integration of these systems with rich third-party data sources will provide vital insights and be key to realising the full potential of automated arbitration. The Verisk verify™ platform already transacts 70 per cent of all UK motor claims. It can draw on an extensive historical archive of personal injury claims data through the MoJ and small claims portals.

Government legislation and advanced technology deployments will control claims costs to some extent, but bringing together data from such broad sources on a single platform unlocks valuable insights for insurers. This will help them achieve a powerful, automated arbitration process while enabling them to adapt to keep pace as claimant behaviour and injury reporting trends evolve.

[i] This article focuses on the advantages gained by parties who engage in binding arbitration. In jurisdictions allowing for non-binding arbitration, losing parties can still seek relief from the court, thus negating the time and cost saving generally associated with binding arbitration.