What does “subrogation” mean in the context of insurance?

Subrogation in the context of insurance refers to the process where an insurer recovers costs from a third party after it has paid a claim to its insured. This typically occurs when the insurer pays for damages or losses that are actually the responsibility of another party. By exercising its subrogation rights, the insurer stands in the shoes of the insured and seeks to recoup the amount paid from the party at fault or their insurer. This mechanism helps prevent the insured from receiving a double recovery, as they cannot collect from both parties for the same loss.

The other options do not accurately represent the concept of subrogation. Denying a claim pertains to the insurer's decision-making process regarding the validity of a claim rather than recovery of costs. Risk assessment is part of underwriting, which involves evaluating the likelihood of a loss occurring and setting premiums accordingly. Issuing a new policy is a standard function of an insurance company but is unrelated to the post-claim recovery processes represented by subrogation.