In the claims process, what does “subrogation” refer to?

Subrogation is a crucial concept in the claims process that involves the transfer of claim rights from the insured to the insurer. This means that after an insurance company pays a claim to the insured for a loss, the insurer has the right to pursue recovery against a third party responsible for that loss. Essentially, it allows the insurance company to step into the shoes of the insured to seek reimbursement for the amount paid out in the claim. This process helps to keep insurance premiums manageable by allowing insurers to recover some costs from at-fault parties.

In contrast, the other options do not accurately depict the nature of subrogation. Automatic payment of benefits does not involve the transfer of rights to pursue claims against others. A denial of coverage is simply a rejection of a claim and does not relate to the transfer of rights. Lastly, an adjustment that favors the insured would imply a result in favor of the insured party during the claims assessment, which is not what subrogation entails. Understanding subrogation is essential for both insured parties and insurers, as it forms an integral part of managing claims efficiently and fairly.