How does the "subrogation" process work in insurance?

The subrogation process in insurance is an important mechanism that allows insurers to recover costs from responsible third parties after they have paid a claim. When an insurance company compensates a policyholder for a loss, it may have the right to pursue a claim against another party that is responsible for that loss. This is where subrogation comes into play.

For example, if a driver is involved in a car accident caused by another driver and their insurance pays for the repairs, subrogation allows that insurance company to seek reimbursement from the at-fault driver's insurance. By doing this, the insurer can recoup some or all of the costs associated with the claim, which helps to keep insurance premiums more stable for everyone.

The other options do not accurately represent the concept of subrogation. Denying claims based on risk, investigating fraudulent claims, or classifying insurance policies are distinct processes that do not relate to the recovery rights of insurers. Subrogation specifically focuses on the recovery of funds from third parties who bear liability for a loss covered by the insured's policy.