What is the advantage of using subrogation in insurance?

The advantage of using subrogation in insurance lies in its ability to allow insurers to recover costs from third parties responsible for a loss. When an insurance company pays out a claim to its policyholder for damages or losses, subrogation enables the insurer to pursue recovery from those who are at fault for the incident. This mechanism not only helps insurance companies mitigate their losses but also reinforces the principle that the responsible party should bear the costs of the damage they caused.

By exercising subrogation rights, insurers can recoup some or all of the funds they paid out in claims, which ultimately helps maintain their financial stability and can potentially lead to lower premiums for policyholders. Subrogation strengthens accountability among third parties, ensuring that they face the financial consequences of their actions.