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

• A. Seek recovery from a third party
• B. Cancel the policy
• C. Increase premiums
• D. Reassess the insured's risk

Answer: (A)

Subrogation is the insurer’s right to step into the insured’s position after paying a claim and seek recovery from the party responsible for the loss. Once the claim is paid, the insurer tries to recover those costs from the third party who caused the damage (or their insurer). This prevents the insured from getting paid twice for the same loss and helps keep overall costs down by shifting the loss to the responsible party. It also supports fair premium pricing because the party at fault ultimately bears the expense.

Subrogation doesn’t involve canceling the policy, increasing premiums, or reassessing the insured’s risk as a direct consequence of the claim payment. Those actions relate to policy management or underwriting, not the recovery of funds after a loss.