The process by which an insurer, after paying a loss, can recover the amount paid from any party who caused the loss is called what?

The process by which an insurer, after paying a loss, can recover the amount paid from any party who caused the loss is called what?

• A. Subrogation
• B. Arbitration
• C. Liberalization
• D. Coinsurance

Answer: (A)

Subrogation is the insurer’s right to step into the insured’s position after paying a loss and pursue recovery from the party responsible for causing the loss. This stops the insured from receiving double recovery and lets the insurer recoup the payment from the at-fault party or that party’s insurer. After the claim is paid, the insurer can sue the third party to recover the amount paid, effectively transferring the insured’s recovery rights to the insurer. For example, in a car accident caused by another driver, the insurer pays for repairs and then seeks reimbursement from the other driver. The other options don’t fit because arbitration is a dispute-resolution method, liberalization refers to expanding policy terms, and coinsurance is sharing risk between the insurer and insured, not recovering paid claims from a third party.

Subrogation is the insurer’s right to step into the insured’s position after paying a loss and pursue recovery from the party responsible for causing the loss. This stops the insured from receiving double recovery and lets the insurer recoup the payment from the at-fault party or that party’s insurer. After the claim is paid, the insurer can sue the third party to recover the amount paid, effectively transferring the insured’s recovery rights to the insurer. For example, in a car accident caused by another driver, the insurer pays for repairs and then seeks reimbursement from the other driver. The other options don’t fit because arbitration is a dispute-resolution method, liberalization refers to expanding policy terms, and coinsurance is sharing risk between the insurer and insured, not recovering paid claims from a third party.