What does "subrogation" allow an insurer to do?

Subrogation is a fundamental principle in insurance that allows an insurer to pursue recovery of costs from a third party that was responsible for a loss after the insurer has compensated the insured for their claim. When an insurer pays a claim to the insured, they may stand in the insured's shoes and seek reimbursement from the party that caused the loss. This process helps insurers to mitigate their losses and manage the financial burden of claims.

By exercising the right of subrogation, the insurer can recover some or all of the costs associated with the claims they have paid out, thereby keeping insurance premiums more stable for all policyholders. This mechanism also holds the responsible party accountable for their actions, reinforcing the principle of liability in insurance.