What does "subrogation" refer to in insurance?

Subrogation in the context of insurance refers to the process by which an insurer seeks reimbursement from a third party who is responsible for a loss that the insurer has already compensated. This concept allows insurance companies to recover the costs they have incurred for claims from third parties that were at fault.

When an insured individual suffers a loss due to another party's actions (for instance, a car accident caused by another driver), the insurer pays the claim to the insured. After compensating the insured, the insurer has the right to pursue the at-fault party to recover those costs. This not only helps to minimize losses for the insurer but also serves to hold the responsible party accountable for the damage caused.

The other options presented do not accurately capture the essence of subrogation. For example, adjusting claim payments relates more to how claims are evaluated and compensated rather than the recovery of costs from third parties. The determination of the probability of future claims pertains to actuarial science and risk assessment, while the transfer of policy ownership involves different processes, such as endorsement or assignment, rather than subrogation.