If a claim is paid under a policy due to negligence, what role does Subrogation play afterward?

Subrogation is a key concept in insurance that allows an insurer to step into the shoes of the insured following a claim payment. When a claim is paid due to negligence, the insurer effectively covers the financial loss experienced by the insured. After this payment, subrogation enables the insurer to pursue recovery from the party that was responsible for causing the loss.

This process helps maintain the principle of indemnity, ensuring that the insured is made whole without profiting from the situation. If the insurer did not practice subrogation, they would incur the costs of the claim while the negligent party would not face any financial consequences for their actions. Therefore, by seeking recovery from the responsible party, the insurer can recoup some or all of the amount they paid to the insured, which helps to keep insurance premiums more manageable for everyone.

The other choices present scenarios that do not reflect the typical practices of an insurer after a claim due to negligence. For instance, having the insurer absorb all losses permanently would undermine the purpose of traditional insurance, and cancelling the policy immediately would not be a standard course of action in these circumstances.