Other Than Life (OTL) Practice Exam 2025 – All-In-One Guide to Exam Success!

Subrogation is a crucial concept in the insurance industry that involves the recovery of funds from a third party after the insurer has paid a claim. When an insurance company compensates a policyholder for a loss, it often has the right to pursue recovery from the party that caused the loss. This means that if someone else was at fault, the insurance company can step into the shoes of the insured party to seek reimbursement for the amount it paid out. This process not only helps insurers to recover costs but also ensures that the responsible party is held accountable for their actions.

By effectively using subrogation, insurers can keep premiums down for all policyholders. It reduces the financial burden on the insurance company, which can, in turn, minimize future rate increases for customers. Understanding the role of subrogation is critical for anyone involved in insurance, as it is a vital part of maintaining the financial health of insurance providers and the industry as a whole.