What role does arbitration serve in the context of insurance claims?

Arbitration serves as a means to resolve disputes between insurers and policyholders regarding claims settlements. This process allows both parties to present their cases to an impartial third-party arbitrator who makes a binding decision. The goal of arbitration in the context of insurance claims is to facilitate a quicker and often less costly resolution than traditional litigation. This alternative dispute resolution method is especially beneficial in scenarios where disagreements arise, allowing for a fair examination of the evidence and arguments from both sides.

In contrast, options related to personal injury claims or penalties for fraud do not accurately represent the primary function of arbitration itself. Furthermore, arbitration does not prevent claims from being filed; rather, it addresses disputes once claims have been submitted and disagreements occur. By focusing on the resolution aspect, it becomes clear why arbitration is specifically geared towards settling differences related to claims.