Disputes between the insured and insurance can be costly if they are not solved amicably.
This can result in destruction of the relationship between the insurer and insured and also bad publicity as a whole regardless of the merits of any one case. The main methods of resolving risks disputes include,
Litigation
This is the system of using courts to resolve disputes. The person who initiates the process is known as the claimant and the person who defends the litigation is called the defendant. The court’s judgement is enforceable against the losing party. The winning body can use court machinery to charge the assets of the losing party if the judgement is not satisfied.
However, litigation has several disadvantages:
- It is slow
- The court hearing is open to the public thus may lead to bad publicity
- Judges may lack technical knowledge to handle disputes in certain areas of commerce.
- Rigidity and inflexibility, most judges use case law or precedent to make rulings
Arbitration
Arbitration is an alternative to litigation. Insurers frequently choose to refer their disputes to arbitration rather than go to the court. This enables the matter to be resolved in private by persons who have been chosen for their expert’s knowledge in that particular class of insurance.
This allows for speed because unlike litigation, the procedure is simple. The decision of an arbitrator is binding on both parties and can be enforced in the court of law.
Mediation
The parties to the contract appoints a third party to assist them reach an agreement. The mediator facilitates the process of persuading the parties to reach a compromise agreement using their negotiation skills. The advice they give is not binding to the parties.
Commissioner of Insurance
In the event of a dispute relating to the settlement of life assurance policy where the sum assured is not more than KES 10,000, the dispute may be referred to the commissioner for determination. The commissioner’s decision legally binding and be implemented by the court.
