What is subrogation in insurance claims?

Subrogation refers specifically to the process by which an insurance company seeks reimbursement from a third party that is responsible for causing a loss to an insured party. When an insurer pays a claim to its policyholder for damages, it obtains the right to pursue recovery of those costs from the third party that caused the damage. This is a fundamental concept in insurance that helps insurers manage their losses and keeps the cost of insurance down for consumers.

The process allows insurance companies to recoup the amount they have paid to their insured, which can help keep premiums lower in the long run. Understanding subrogation is essential for insurance adjusters as it directly relates to how claims are processed and how costs are managed within the insurance industry.

Since the other choices do not accurately define subrogation, they focus on unrelated aspects of the claims process. The initial review of a claim is part of the claims handling procedure, while denying claims and the total payout amount are metrics or actions within the broader context of insurance that do not pertain to the recovery aspect of subrogation.