Alternative Dispute Resolution: “Virtual Settlement” online

In today’s competitive market, insurers and their claims managers are struggling to combat the growing impact of allocated loss expenses. They also face increased workloads as a result of staff reductions while increased consumer expectation of service has raised the competitive stakes. As a result, now more than ever, the pressure has been turned on adjusters to settle claims quickly and efficiently.

A leading Canadian insurance company recently indicated that its average closure rate of casualty losses was 4.42 years, with 70% of loss assigned to defense counsel. This outcome is said to be fairly typical for the property and casualty insurance industry in Canada. As a result, companies are looking for innovative alternatives to reduce the time and expense associated with claim resolution and litigation.

With recent technology advances and the explosive growth of the Internet, several large insurers have begun exploring the use of high-tech solutions in the claims handling field. However, with many such dedicated initiatives, the cost of development outweighs the end benefit, particularly where the solution is not proven technology. This void in the market has allowed for independent e-commerce solution providers to step forward with shared technology platforms. In the case of Cybersettle.com Inc., which recently launched operations in Canada, the shared technology is not only cost-effective to users, but provides added competitive advantages over the traditional approach to casualty legal settlements.

Virtual settlements

Essentially, Cybersettle is the world’s first Internet dispute resolution system. It provides insurers, claimants and other entities with 24-hour, seven day a week access to a real time, fully secure settlement system. Co-founders of Cybersettle.com Inc., chairman James Burchetta and president Charles Brofman (experienced New York trial lawyers), conceived the original business idea while trying to settle a lawsuit in which they represented opposite sides. Hung up on a settlement, they agreed to secretly write down on a slip of paper their bottom-line offer and demand, and then submit them to a court clerk. They agreed that if the requests were within $5000 of each other they would settle the case for the median amount. The clerk smiled and gave a thumbs-up: the numbers were within $1000. They settled the case on the spot. Burchetta and Brofman realized they were onto something — which did not require slipping pieces of paper to a court clerk…hence the creation of Cybersettle.

Online settlement

The Cybersettle system allows participants to submit three rounds of settlement offers or demands via its confidential website. If an offer and demand are in a round are within an agreed range, typically 30% or $5000, the claim is instantly settled for the median amount. If none of the offers are within range it does not settle. However, neither party’s position is weakened, because the bids are completely confidential. The heart of the system is the secure website through which all participants access the service. Claimants, lawyers and claims adjusters can confidentially submit offers or demands on a particular claim simply by accessing the website through the Internet. No special software is required just a computer and access. Like conventional alternative dispute resolution (ADR), Cybersettle is completely voluntary in that both sides must agree to participate. To preserve confidentiality, passwords and private identifications are assigned to all parties. The website is also encrypted to prevent unauthorized access.

A fundamental feature of the system is that neither side has access to the other party’s figures. If an attempt to settle on-line is unsuccessful, both sides are free to take whatever future settlement positions they want to, without fear that their adversary could use a prior demand or offer against them.

Cybersettle does not evaluate the value of claims or legal positions, however, the system eliminates the temptation to posture. The system encourages the parties to evaluate their respective positions promptly and candidly, knowing that they can do no worse than settle the claim on numbers that are acceptable to them.

Cost-effective solution

Another advantage of on-line dispute resolution is its low cost. The insurance company pays $30 to place a claim into the Cybersettle system. If the claimant or his lawyer agrees to try the system and he enters his settlement demands, the insurer pays an additional $75. To encourage participation, the claimant is not charged unless the claim settles. If the case does not settle, neither party pays. If the case settles, each party pays an additional $250 as a success fee. cu