Redesigning Consumer Dispute Resolution: A Case Study of the British and American Approaches to Insurance Claims Conflict

Abstract

Much of insurance law and regulation is concerned with compensating consumers who have been wrongly denied coverage. But policyholders nonetheless have relatively few realistic options for challenging an insurer's adverse coverage determination. Litigation is often too slow and costly for those who have recently suffered significant financial loss. Meanwhile, the alternative dispute resolution (ADR) options that do exist-such as the conciliation services that insurance regulators offer or the existing variants of insurance arbitration-are generally either ineffective or unavailable for most disputes. This Article proposes a new way forward by looking to the United Kingdom's innovative Financial Ombudsman Service (FOS), which operates parallel to the British financial services regulator and is devoted solely to resolving consumer financial disputes. The comparative success of the FOS, the Article argues, is attributable primarily to the ways in which it blends elements of the individual, uncoordinated insurance ADR schemes that are used in the United States. As such, this Article concludes that American lawmakers can significantly improve insurance compensation by strategically rethinking the institutional architecture of insurance dispute resolution. It also suggests that the British FOS may offer a model for improving consumer dispute resolution in realms beyond insurance.