What method of claim settlement is used when the insured and insurer disagree on the amount of the loss?

The method of claim settlement used when the insured and insurer disagree on the amount of the loss is arbitration. In this process, an independent third party, known as an arbitrator, is brought in to review the evidence presented by both parties and make a binding decision on the dispute. This is particularly useful in insurance claims because it provides a structured and faster alternative to litigation, allowing both the insured and the insurer to present their cases without going through a lengthy court process.

Arbitration is favored in insurance matters because it can help preserve the business relationship between the parties and tends to be less formal and less costly compared to litigation. It often results in a quicker resolution, which is beneficial for both the insurer and the insured when navigating through disagreements over loss amounts.

While mediation involves a neutral third party to facilitate discussions between the two sides, it does not lead to a binding decision, which differs from arbitration where the arbitrator's ruling is typically final. Negotiation is a more informal process where both parties attempt to reach an agreement on their own, and litigation requires court involvement and can be much more time-consuming and expensive. Therefore, arbitration stands out as the appropriate settlement method for resolving disputes over loss amounts in insurance claims.