What does the principle of subrogation enable the insurer to do?

The principle of subrogation is a fundamental concept in insurance that allows the insurer to step into the shoes of the insured after paying out for a claim. This means that once an insurer has compensated the insured for a loss, they have the right to pursue recovery from any responsible third party that caused the loss.

By enabling the insurer to recover the costs from the party at fault, subrogation helps to ensure that the insured does not profit from the insurance payout while also allowing insurers to recoup the funds they have disbursed for claims. This process not only aids in maintaining the financial balance of insurance operations but also reinforces accountability by holding the liable parties responsible for their actions.

The principle does not involve reinsurance, dealing with claims from another insurer, or applying a franchise, which are separate processes and concepts within the insurance framework.