Is standard arbitration clause valid in insurance contracts?

More insurance companies are choosing to use standard arbitration clauses in their insurance contracts, allowing their preferences for confidentiality to be satisfied and giving them more efficient control over the management and resolution of insurance claim disputes.

Especially after the People’s Republic of China (PRC) Supreme People’s Court issued the Interpretation of the Application of the Civil Procedure Law of the PRC on 30 January 2015, this trend could also be seen as a response to this interpretation, which grants the assured the right to select the people’s court at the place of their domicile as the competent court for personal insurance cases.

In practice, the standard arbitration clause is sometimes deemed to be an exempting clause before the court, so the insurance company is requested to remind and expressly explain the clause under the insurance law for its validity. However, such a court decision is incorrect because arbitration, as an effective and legal alternative dispute resolution other than litigation, only changes the procedure instead of any liability distribution among the parties, and does not aim to exempt insurance companies from liability in the insurance contract.

PHIL WANG and XIA XIAOPING are partners at Boss & Young in Shanghai.