Arbitration has been slated as costly, time-consuming and inflexible, in a survey conducted by City firm Berrymans.
The survey revealed that arbitration, introduced as a cost-effective and speedy alternative to litigation, is not popular with insurance companies.
Paul Taylor, a leading insurance litigator and senior partner at Berrymans, presented the results of the survey to the Chartered Institute of Arbitrators at a symposium last month.
The firm received over 20 replies from major insurance companies in the UK, in response to a questionnaire sent out in June.
Over 90 per cent of the respondents felt current arbitration procedures were too similar to normal litigation practices and therefore failed to provide an adequate alternative. Less than 20 per cent of insurers thought the arbitration process was faster and more flexible than litigation, and only 17 per cent of respondents preferred arbitration to litigation.
And nearly 75 per cent thought that alternative dispute resolution, in which parties appear before a mediator, was of more value to insurers as an alternative to litigation.
A senior manager of one of the top three UK-based insurers, said: "We have seen no convincing argument or evidence that arbitration actually delivers an alternative to litigation, offering cheaper, more efficient, quicker solutions and decisions."
Taylor concluded: "Insurers clearly want a cheaper, quicker alternative to litigation. Arbitration can still provide this but arbitrators must clearly try harder with insurers."
But the Chartered Institute of Arbitrators said the survey only served to highlight insurers' ignorance about the arbitration process. Kerry Harding, secretary general, said: "If those interviewed were of the opinion that arbitration does not provide a cost-effective service since it mimics court procedure, it is probably because they are not being given sufficient objective advice from their legal counsel.
"Arbitration is inherently flexible and procedures can be adapted by the parties to suit their own needs."