What is the principle of subrogation primarily associated with in insurance?

The principle of subrogation is primarily associated with the transfer of rights to recover costs after an insurance company has paid a claim to the insured. When an insurer compensates a policyholder for a loss, the insurer obtains the right to pursue any third party responsible for that loss in order to recover the funds it has paid out. This process reinforces the principle of indemnity, which ensures that insured individuals do not profit from their insurance coverage but are restored to their financial position prior to the loss.

Subrogation effectively upholds the principle of indemnity by preventing the insured from collecting more than their actual loss. By allowing insurance companies to pursue recovery from responsible parties, subrogation helps keep premiums in check and can reduce the overall cost of insurance.

While the other options mention aspects related to insurance, they do not capture the essence of subrogation as directly tied to the transfer of recovery rights by the insurer after fulfilling its obligation to the insured. The focus on the recovery of costs highlights the fundamental nature of subrogation within the insurance framework.