Arbitration is an Alternative Dispute Resolution (ADR) process used to resolve disputes outside the court system. Most car insurance policies let you resolve your dispute through an outofcourt process called arbitration.Less formal than a courtroom jury trial. If the injured-insured and his or her insurance company cannot agree on the amount of the claim, the claim must be submitted to arbitration. Arbitration is the most traditional form of private dispute resolution. Arbitration is a binding procedure. Insurance arbitration relies upon an arbitrator (the neutral third party) to make an appropriate decision based on the specifics of a claim or case.