What does subrogation allow insurers to do?

Subrogation is a legal process that enables an insurer to recover costs that it has paid on behalf of an insured individual after a loss. When an insurer settles a claim, they may seek reimbursement from a third party that is found to be liable for the loss. This allows the insurer to "step into the shoes" of the insured and pursue recovery from the responsible party, thereby reducing their own losses and ultimately maintaining the financial stability needed to provide coverage to all policyholders.

For instance, if the insured suffers a loss due to the actions of another party, and the insurer pays for the damages, subrogation allows the insurer to pursue the third party directly to recover those costs. This process is beneficial not only for the insurer but also helps keep premiums more stable for policyholders, as it helps limit the insurer's losses.