What is the primary function of subrogation in insurance?

The primary function of subrogation in insurance is to recover costs from a third party. When an insured party suffers a loss and their insurance company pays for that loss, subrogation allows the insurer to pursue the responsible third party to recover the amount they paid out in claims. This process not only helps the insurer to mitigate their losses but also ensures that the responsible party is held accountable for their actions. By doing so, subrogation helps keep insurance premiums lower for all policyholders, as it reduces the financial burden on the insurer. Thus, this recovery process is a key mechanism in the insurance industry that promotes fairness and accountability.

The other choices do not accurately capture the essence of subrogation. While avoiding future claims and transferring risk are important aspects of insurance, they do not pertain specifically to the recovery process enabled through subrogation. Settling disputes between insurers could occur in various contexts but is not the primary focus of subrogation itself, which is fundamentally about recovering costs from those who are liable for the insured loss.