What does "subrogation" refer to in insurance claims?

Subrogation refers to the process by which an insurer seeks recovery from a third party responsible for a loss after it has paid a claim to the insured. This mechanism enables the insurance company to recoup the amount it has paid out under the policy, effectively standing in the shoes of the insured to pursue recovery from those who may have caused the damage or loss.

For example, if an insured party has an accident caused by another driver, the insured's insurer may compensate the insured for their damages. Subsequently, the insurer can exercise its subrogation rights to claim those costs back from the at-fault driver or their insurance company. This process not only helps the insurer manage its expenses but also keeps insurance premiums more manageable for all policyholders by preventing losses from being absorbed unchallenged.

The other choices do not accurately describe subrogation: denying a claim does not involve recovery processes, settling policies is unrelated to the act of seeking reimbursement from a third party, and adjusting claims with multiple insurers pertains to a different aspect of insurance claims management rather than the recovery process defined by subrogation.