What does subrogation allow an insurer to do?

Subrogation is a legal process that allows an insurer to step into the shoes of the insured party to pursue recovery of funds from a third party responsible for a loss. When an insurer indemnifies a policyholder by paying for a loss, subrogation gives the insurer the right to recover that amount from the party that caused the damage. This process helps to ensure that the costs of losses are ultimately borne by those who are responsible, rather than by the insurer or the insured.

In this context, when the insurer indemnifies the policyholder, it enables the insurer to seek reimbursement from the third party, thereby recovering the funds it paid out. This practice helps to reduce costs for the insurer and can also prevent policyholder premiums from increasing unnecessarily.