What is the primary purpose of subrogation in insurance?

Subrogation is an essential principle in insurance that allows insurers to pursue recovery from third parties who may be responsible for a loss after they have compensated the insured. When an insurance company pays a claim to its policyholder for damages or losses, subrogation enables that insurer to seek reimbursement from the at-fault party. This process helps to ensure that the responsible party ultimately bears the financial burden for the loss, rather than the insurer or the insured.

Additionally, subrogation promotes accountability and can help lower insurance premiums by allowing insurers to recoup some of their costs. By transferring the right to recover damages from the insured to the insurer, it facilitates a fair and efficient claims process, where the financial responsibility is assigned to the party at fault. Overall, this mechanism is crucial for maintaining the balance within the insurance system, ensuring that those who cause damage are held liable.