What process allows an insurer to recover costs from a third party responsible for a claim?

Subrogation is the process that enables an insurer to recover costs from a third party who is responsible for a loss covered by an insurance policy. When an insurance company pays a claim to its insured, it assumes the rights of the insured to pursue recovery from the party at fault. This process is crucial because it helps to ensure that the burden of paying for a loss doesn't fall unjustly on the insurer or the insured when another party is actually liable.

Through subrogation, insurers can reclaim some or all of the money paid out in claims, which can help keep insurance premiums more affordable for policyholders. It serves both as a mechanism of accountability for the responsible parties and as a means for insurance companies to recoup their expenses, thus maintaining the financial integrity of the insurance system.

The other options, while relevant to insurance concepts, do not pertain to the recovery of costs from a third party. Indemnification refers to the compensation provided for losses or damages, assignment involves transferring rights or benefits under a policy, and loss mitigation pertains to efforts made to reduce the chances or severity of a loss occurring. Subrogation specifically addresses the recovery of funds from a third party which makes it the correct answer in this context.