What does subrogation involve in insurance?

Subrogation is a critical concept in insurance that involves the insurer's right to pursue a third party to recover the costs of a claim that they have already paid to the insured. When an insurance company pays for a loss suffered by the policyholder, it may seek reimbursement from the responsible party, typically when that party's negligence or wrongful conduct caused the loss. This process not only helps insurers recover funds but also prevents the insured from profiting from the insurance payout, maintaining the principle of indemnity within insurance.

In the context of this question, the option that describes subrogation accurately highlights the role of the insurer in reclaiming losses from a third party. Recognizing this process is essential for understanding how insurance works and the relationships between insurers, insureds, and third parties involved in claims. This knowledge underpins the broader mechanism of risk management and financial stability in the insurance industry.

Other options do not correctly represent subrogation. For instance, ignoring minor claims pertains more to claim handling practices rather than the recovery process through third-party liability. Identifying potential risks relates to underwriting assessments, not subrogation. Choosing a higher deductible is a matter of policyholder decisions regarding out-of-pocket expense but does not involve the subrogation process at