What does the principle of 'subrogation' allow an insurer to do?

The principle of subrogation allows an insurer to pursue recovery from a third party responsible for a loss after the insurer has compensated the insured for that loss. This principle is essential to the insurance process because it helps ensure that the insured does not profit from a loss, while also allowing the insurer to recover some or all of the costs incurred in fulfilling its obligation to the insured.

When an insurance company pays a claim to an insured, it steps into the shoes of the insured and gains the right to seek reimbursement from the third party who caused the loss. This principle helps to minimize losses for the insurer and maintains the integrity of the insurance system, preventing the insured from receiving double compensation for the same loss.

In contrast, the other choices pertain to different aspects of insurance practices that do not relate to the principle of subrogation. For instance, canceling a policy, increasing premiums, or negotiating premium amounts are administrative or pricing decisions rather than recovery rights established by the principle of subrogation.