What is meant by subrogation in the context of claims?

Subrogation, in the context of insurance claims, refers to the process whereby an insurance company seeks to recover the amount it has paid for a claim from a third party that is responsible for the loss. This practice allows the insurer to step into the shoes of the insured to pursue recovery from those who may be liable, such as another individual or organization.

When an insurer pays for a loss due to an accident caused by someone else, it gains the right to pursue the responsible party to recoup its expenses. This mechanism helps keep insurance premiums lower because it allows insurers to recover funds and reduces their overall loss exposure.

In the options provided, transferring a claim to a related party, finding alternative solutions to avoid claims, and settling claims without involving insurance do not encompass the fundamental concept of subrogation, which is specifically about recovering costs from a third party. Therefore, the correct answer captures the essence of subrogation accurately and highlights its role in the claims process within the insurance industry.