What does subrogation allow an insurer to do after paying a loss?

Subrogation is a key principle in insurance that allows an insurer to pursue recovery of funds from the responsible third party after they have compensated the insured for a loss. Once the insurer has paid the claim to the insured, they gain the right to step into the shoes of the insured to seek reimbursement from the party that caused the loss. This helps to reduce the overall costs for the insurer and can help keep insurance premiums lower for all policyholders.

By exercising subrogation, the insurer can reclaim the amount paid out in claims, which helps maintain the balance of risk and cost distribution within the insurance system. This mechanism also helps to ensure that the party responsible for the loss is held accountable for their actions, rather than leaving the financial burden solely on the insurer and the insured.

The other choices do not accurately represent the function of subrogation. For instance, recovering premium costs or canceling a policy relates to the contractual aspects of insurance and does not pertain to the recovery process after a claim has been paid.