What does subrogation allow an insurer to do?

Subrogation is a crucial concept in insurance that allows an insurer to recover costs after they have compensated a policyholder for a loss. When an insurer pays out a claim to their insured, they essentially take over the right to pursue any legal action against the party responsible for the loss. This process ensures that the insurance company can recoup its expenses, particularly when a third party is found to be at fault for the incident that resulted in the claim.

In this context, recovering losses after indemnifying a policyholder ensures that the financial burden of paying for damages does not fall solely on the insurer. Instead, if the insurer can successfully pursue recovery from the negligent party, they can offset the costs incurred while providing coverage under the policy. This mechanism promotes fairness in the insurance industry and prevents insured individuals from profiting from double compensation for the same loss.

The other options relate to different aspects of insurance and do not correctly define the purpose of subrogation. Changing policy terms after a claim does not pertain to subrogation, and negotiating directly with insured individuals does not encompass the rights typically exercised through subrogation. Waiving all claims for a loss also does not represent the process or legal rights granted through subrogation. Therefore, the correct choice