What is the purpose of subrogation in insurance?

The purpose of subrogation in insurance is to enable insurers to recover amounts paid to the insured from a responsible third party. This process occurs after an insurer pays a claim to the policyholder for a loss caused by another party. Instead of letting the loss go unrecovered, the insurer can "step into the shoes" of the insured and seek compensation from that third party who was responsible for the damages. This not only helps the insurance company recoup its losses but also keeps insurance premiums in check by preventing the insured from receiving a double recovery—once from their insurer and again from the responsible party.

Other options like allowing insurers to ignore fraudulent claims or to increase premiums for policyholders do not align with the essence of subrogation, which is primarily concerned with the recovery of funds after claims have been paid out. Similarly, ensuring coverage for natural disasters does not pertain to the subrogation process, as it relates more to the initial coverage terms and not the recovery process post-payment.