What does "subrogation" allow an insurer to do?

Subrogation is a crucial principle in insurance that empowers an insurer to take action after they have paid a claim on behalf of their insured. When the insurer pays for a loss caused by a third party's negligence or wrongful actions, subrogation allows the insurer to recover some or all of those costs by pursuing legal action against that third party. This process helps the insurer to minimize their losses and maintain the financial integrity of their operations.

This concept is essential as it ensures that the responsible party is held accountable for the damages they cause, while also ensuring that the insurer can recoup funds that were disbursed to settle a claim. By prioritizing the recovery aspect, subrogation aligns the interests of the insurer and the insured, ultimately reducing the overall cost of claims and insurance premiums over time.