What is the purpose of subrogation in insurance?

The purpose of subrogation in insurance is primarily to prevent double recovery for the same loss. When an insurance company pays a claim to the insured, it often has the right to pursue recovery of those costs from a third party responsible for the loss. This process ensures that the insured receives compensation for their damages without receiving more than what they are entitled to, thereby maintaining the principle of indemnity, which is a core concept in insurance. Subrogation serves the insurance industry by allowing them to recover the losses they have paid out, while also discouraging insured individuals from profiting from their insurance coverage or excessively inflating claims. In this way, it helps to maintain the integrity and sustainability of the insurance system.