Nationwide Inter Company Arbitration

Illinois Senate Bill SB0152 Is Moving Ahead To Become Law?

by Ed Sneineh, ChFC

The Illinois SB0152 is requiring all auto insurance companies to sign up with a non government agreement known as Nationwide Inter-Company Arbitration (NICA). There are over 4,000 insurance companies that signed this agreement. The agreement is  medium through which insurance carriers work with and resolve disputed issues related to claims among themselves through arbitrations, without having to go to courts. The arbitrators are normally well knowledgeable  adjusters with several years of experience. The NICA program is administered by Arbitration Forums Inc., a non-profit organization, headquartered in Florida. The program resolves about half million insurance disputes every year with an estimated value of about $2.5 billion.

Not all auto insurance companies are signatories to the agreement. The  process of settling the claims under the agreement and between participating companies rely on each companies submitting every fact they have to the arbitrators, and then wait for the final decision. So if your company is not happy for paying your claim because they think it is the other person's fault, then the adjuster of your company will file the proper paperwork including all supportive documents (statements, photos, estimates, bills, etc.) to arbitration and to the opposing company. Very serious guidelines and timetables are used in the process of filing the paperwork.

Non Standard Companies Are Not In Favor

The process is not appealing to certain companies who think that  the whole idea is unfair, perhaps because of the nature of their clients that are less strict in getting as much information as possible at the time of crash, and relaying that information to their carriers! Some non-standard companies do not subscribe to the agreement, and would rather act  against it for the above reasons and other reasons including:

  • Questioning witnesses and other motorists are not allowed in the agreement. 
  • Live experts are not allowed.
  • Neither the insured persons nor their companies are allowed to be present in arbitration sessions . 
  • No one can contest the capability of arbitrators in their experience or judgment.
  • The decisions are mechanical, usually for 100% of the claim. 
  •  No meaningful way to appeal the arbitration decision.

Pros and Cons of the Agreement

Insurers that work in the non standard markets are less likely to agree with this Agreement because their clients are less likely to cooperate at the time of crash or provide information that clients of standard carriers provide. For that reason, non standard companies will be suffer more. If SB0152 becomes a law in Illinois, non standard customers will have to pay more for insurance, while the quality of service will go up. While that is very good news to the public, increasing insurance premiums will leave more people driving uninsured.

Non standard insurers can benefit from the law in terms of charging higher premiums, which means more profit. Since the law will make it mandatory for every insurer to sign, the increase in premiums is expected to be relatively equal with all companies, hence competition in the same class of companies will not be much different. The claim that only non standard companies do wangle and dodge other insurers before paying the claim is not true. There are standard companies that do the same thing, although the practice is more prominent with large claims. So the Bill may work in the favor of the non standard carriers as well. Generally speaking, companies will save in their legal fees by avoiding court expenses.

For customer of non standard companies, there is no doubt that prices of insurance will go up,  so will the quality. Slow and unreasonable claims settlement practices in Illinois  will come closer to end. Customers of standard and preferred insurers will have to pay higher premiums as well, because these preferred and standard carriers will end up seeing more uninsured motorists causing damages to their customers vehicles.

Winners and Losers

Independent auto insurance agents in Chicago will end up reaping the benefits if the Bill  passes. First the improved claim payment services of the companies will mean less claim services in the independent agent office. And 2nd, the increase in the  premiums will lead to higher commission. Many of the lawyers who work on small auto insurance claims will surely lose lots of their business if SB0152 is enacted, as enacting the bill will diminish the demand on their services.

posted on Thursday, March 30, 2017