What is the function of subrogation in insurance?

Subrogation in insurance serves the critical function of allowing insurers to recover costs from a third party that is responsible for a loss. When an insured party suffers a loss and the insurance company pays for that loss, the insurer assumes the right to pursue recovery from any party that may have caused or contributed to the loss. This process helps to keep insurance costs manageable for all policyholders, as it reduces the financial burden on the insurer and can ultimately prevent increased premium rates.

The process of subrogation not only benefits the insurance company but also promotes accountability among third parties. By enabling insurers to recoup costs, it reinforces the principle that those who cause losses should be held financially responsible. This collaborative aspect of risk management is essential for maintaining the viability of the insurance system.

Understanding subrogation is crucial for brokers, as it impacts how claims are handled and the relationships between insurers and policyholders. It further emphasizes the importance of thorough investigation of claims to identify any liable third parties, ensuring that subrogation rights are effectively exercised when applicable.