What is the term for the process in which an insurer seeks recovery from a third party after paying the insured?

What is the term for the process in which an insurer seeks recovery from a third party after paying the insured?

• A. Subrogation
• B. Reinsurance
• C. Negligence
• D. Underwriting

Answer: (A)

The term that describes the process in which an insurer seeks recovery from a third party after paying the insured is subrogation. This process allows the insurance company to step into the shoes of the insured once it has covered a loss. Essentially, after the insurer compensates the insured for a claim, the insurer has the right to pursue any legal claims against the party responsible for the damage or loss. This is done to recover the amount paid out, thereby helping to reduce the overall costs of claims and insurance premiums. Subrogation is crucial in ensuring that the responsible party ultimately bears the financial burden of the loss, rather than the insurer or the insured. This mechanism not only protects the interests of the insurance company but also supports the principle of fairness in the insurance system.

The term that describes the process in which an insurer seeks recovery from a third party after paying the insured is subrogation. This process allows the insurance company to step into the shoes of the insured once it has covered a loss. Essentially, after the insurer compensates the insured for a claim, the insurer has the right to pursue any legal claims against the party responsible for the damage or loss. This is done to recover the amount paid out, thereby helping to reduce the overall costs of claims and insurance premiums.

Subrogation is crucial in ensuring that the responsible party ultimately bears the financial burden of the loss, rather than the insurer or the insured. This mechanism not only protects the interests of the insurance company but also supports the principle of fairness in the insurance system.