What is the primary purpose of subrogation in insurance claims?

Subrogation is a fundamental principle in insurance that allows an insurer to pursue a third party that may be responsible for a loss incurred by the insured. This process serves the primary purpose of recovering costs that the insurer has paid out in claims. When an insurer compensates the insured for a covered loss, they gain the right to seek reimbursement from the party that is deemed liable for that loss.

For instance, if a driver is involved in an accident caused by another driver, the insured driver’s insurer may cover the damages. Through subrogation, the insurer has the right to claim that amount back from the at-fault driver's insurance, thereby recovering costs. This mechanism not only helps the insurer mitigate losses but also keeps overall insurance costs lower by reducing the impact of claims on remaining policyholders.

Options that focus on managing underwriter risks, enhancing customer relations, or minimizing premiums do not directly relate to the function of subrogation. While these aspects can be influenced indirectly by subrogation practices, they do not capture its core purpose, which is centered around the recovery of costs from third parties.