Page 53 - The Insurance Times January 2025

Challenges of Arbitration in Insurance by an additional six months. Further extensions re-
quire court approval, which may be granted upon
1. Cost Concerns: demonstrating sufficient cause.
o While cost-effective compared to litigation, arbitra-
tion can still be expensive for small claims.
Selection of Arbitrators
2. Power Imbalance:
1. Mutual Agreement:
o Insurers may dominate the process if the policy- o Parties may mutually agree on the appointment of
holder lacks resources or expertise.
a sole arbitrator or a panel of arbitrators with rel-
3. Enforcement Issues: evant expertise.
o Enforcing arbitral awards can face delays if chal- 2. Institutional Appointment:
lenged in courts.
o In cases where parties cannot agree, an arbitral in-
4. Limited Recourse: stitution designated in the arbitration clause may
o The scope for appealing an arbitral award is re- appoint the arbitrator(s).
stricted, which can be a disadvantage for dissatis- 3. Judicial Intervention:
fied parties.
o If institutional mechanisms are absent or fail, par-
Cost Implications ties can approach the court under Section 11 of the
Arbitration and Conciliation Act, 1996, for the ap-
Comparative Cost Efficiency: pointment of arbitrators.
o Arbitration is generally more cost-effective than
court litigation due to streamlined procedures and 4. Consideration of Expertise:
reduced legal fees. o Selecting arbitrators with specialized knowledge in
insurance law can enhance the quality and effi-
Shared Expenses:
ciency of the dispute resolution process.
o Costs associated with arbitration, including arbitra-
tors' fees and administrative expenses, are typically
shared between the parties, as agreed upon or Conclusion
directed by the tribunal. The arbitration clause in insurance policies offers a robust
framework for resolving disputes efficiently, cost-effectively,
Potential Additional Costs: and fairly. It ensures policyholders and insurers can address
o While arbitration can be economical, complex cases disagreements without resorting to protracted litigation. In
may incur higher costs due to extended proceed- India, the Arbitration and Conciliation Act, 1996, has made
ings or the need for expert witnesses.
arbitration a preferred mechanism for insurance disputes,
Timeframe for Resolution aligning with the global trend of alternative dispute resolu-
tion.
Statutory Timeline:
o The Arbitration and Conciliation Act, 1996, man-
dates that arbitral proceedings should be concluded For policyholders and insurers, understanding the arbitra-
tion process, associated costs, and legal frameworks is cru-
within 12 months from the date the arbitral tribu-
nal is constituted. cial to making informed decisions. With continued empha-
sis on dispute resolution mechanisms, arbitration is set to
Extensions: play a pivotal role in shaping the future of insurance claims
o Parties may mutually agree to extend the timeline management in India.

Insurers Allowed to Offer Value-Added Services

The Indian government is set to allow insurance companies to provide value-added non-insurance products and ser-
vices related to their core offerings, aiming to enhance insurance penetration and offer competitively priced risk
mitigation solutions. This initiative will enable insurers to bundle their primary insurance products with supplementary
services, such as health and wellness programs, vehicle maintenance services, and risk management tools. However,
insurers will not be permitted to sell mutual funds or other unrelated financial products. The Insurance Regulatory
and Development Authority of India (IRDAI) is expected to issue detailed guidelines outlining the scope of permissible
value-added services and the regulatory framework governing these offerings.

The Insurance Times January 2025 47