What does the term "subrogation" refer to in the context of insurance?

Subrogation refers to the insurer's right to pursue third parties that are responsible for a loss after it has compensated the insured for their claim. This concept allows the insurance company to recover the amount it paid out on a claim by seeking reimbursement from the party that caused the damage or loss.

For instance, if an insurer pays an insured for damages caused by another driver in an accident, the insurer has the right to step into the shoes of the insured and pursue a claim against the at-fault driver or their insurance company. This helps the insurer mitigate its losses and ensures that the financial burden of the accident falls on the responsible party rather than the insurer itself.

This principle serves a dual purpose: it helps keep insurance premiums more affordable by reducing the potential losses for insurers, and it promotes accountability among parties involved in causing damages or injuries.