One of the purposes of subrogation is to?

• A. Hold negligent third parties at fault
• B. Control moral hazard
• C. Keep insurance premiums low
• D. Expand coverage

Answer: (C)

Subrogation is when an insurer, after paying a claim to the insured, steps into the insured’s shoes to recover those costs from the party responsible for the loss. The main idea is to shift the financial burden of a loss from the insured to the party whose fault caused it.

This helps keep insurance premiums down because every time the insurer recovers money from the at-fault party, it reduces the insurer’s net loss from that claim. Lower overall claim costs mean the company can price policies more accurately and maintain lower or more stable premiums for all policyholders. It also prevents the insured from being paid by the insurer and then able to sue the third party twice for the same loss.

The other options aren’t the primary purpose. Subrogation isn’t about legally declaring fault or controlling moral hazard on its own, and it doesn’t expand coverage. Its central function is cost recovery to help keep premiums reasonable.