What is subrogation in the context of insurance?

Subrogation in the context of insurance refers to the right of an insurer to pursue a third party that caused an insurance loss to the insured. When an insurer pays a claim to the insured, it may then take legal action against the responsible party to recover the amount it paid out. This process allows the insurer to recover losses from a negligent third party on behalf of the insured.

This mechanism helps keep insurance costs manageable and ensures that the party at fault bears responsibility for their actions. The other options do not accurately capture the essence of subrogation. For example, the provision of collateral damages deals more with compensatory aspects rather than the insurer's right to reclaim losses from a third party. Responsibilities around reporting losses or the timing of claims focus on communication and claim management rather than the recovery of funds after a payment has been made.