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Alternative Dispute Resolution (ADR)

Contents

  1. Understanding Alternative Dispute Resolution (ADR)
  2. How ADR Works
  3. Pros and Cons of ADR

Demystifying Alternative Dispute Resolution (ADR) in Insurance

Understanding Alternative Dispute Resolution (ADR)

Alternative dispute resolution (ADR) in insurance refers to various methods used by companies to settle claims and contractual disputes outside of the courtroom. It offers insured clients an alternative to lengthy and costly litigation processes.

How ADR Works

ADR kicks in when attempts to resolve disputes directly between the client and the insurer fail. Most insurance policies include ADR clauses, and the two primary methods are mediation and arbitration. Mediation involves a neutral third party facilitating communication, while arbitration involves a decision-maker rendering a final judgment, which can be binding or non-binding.

Pros and Cons of ADR

While ADR is lauded for its potential time and cost savings, it's not always a perfect solution. Some cases may still end up being as expensive and stressful as litigation, especially in complex disputes. Additionally, the neutrality of arbitrators may be questioned, and it's advised to exhaust internal appeals and consider hiring a public adjuster before pursuing ADR.