What is the process of subrogation in insurance?

Subrogation in insurance refers to the process where an insurance company, after paying a claim to its insured, seeks to recover the costs from a third party that may have caused the loss. This typically occurs when an insured individual suffers damage or loss due to someone else's negligence. Once the insurance company compensates the insured for the covered loss, it then has the right to pursue a claim against the responsible party to recover the amount it paid out.

This process protects the insurance company from financial loss and ensures that the at-fault party is held accountable. Subrogation helps to prevent the insured from profiting from the claim since they can only recover the amount necessary to cover their loss; any additional recovery goes back to the insurer. By effectively transferring the right of recovery after a claim is settled, subrogation helps maintain fair play within the insurance system.

The other options refer to different aspects of insurance operations but do not relate to the concept of subrogation. Setting premiums involves assessing risk to determine how much policyholders should pay for coverage, negotiating renewals relates to maintaining client relationships, and analyzing risk before issuing a policy pertains to underwriting decisions. Each of these processes plays a vital role in the functioning of an insurance company, but they do not