What is the purpose of the subrogation process?

The subrogation process serves as a mechanism to ensure that an insured party does not receive double recovery for the same damages. After an insurance company pays a policyholder for a loss, subrogation allows the insurer to pursue a third party that may be legally liable for the damages. This process helps to recover the amount paid out under the policy, which in turn maintains the integrity of the insurance system—ensuring that losses are compensated, but that no party benefits financially from both the insurance payment and the third-party recovery.

When an insurer recovers funds from a responsible third party, it helps to keep premiums lower for policyholders by minimizing the losses incurred by the insurance company. This process is crucial in maintaining fairness in the insurance market, as it prevents individuals from profiting from their losses while leveraging the benefits offered by their insurance coverage.