What does "subrogation" refer to in an auto insurance policy?

Subrogation in an auto insurance policy refers specifically to the process by which an insurance company seeks reimbursement from the at-fault party after it has paid a claim to its insured. When an insured individual files a claim due to damage or loss caused by another party's actions, the insurance company may cover the costs of that claim. Following this, the insurer has the right to pursue recovery of those costs from the party responsible for the incident. This mechanism helps keep insurance premiums lower by allowing insurers to recover expenses associated with claims they have paid out.

In contrast, the other choices relate to different aspects of insurance practice. Negotiating claim settlements pertains to the discussions between insurers and policyholders regarding the amounts to be paid for claims. Renewing an expired policy deals with continuing coverage after a policy term ends, and cancellation by the insured involves the policyholder ending their coverage before the policy's term concludes. These processes do not relate to the transfer of rights to recover costs from another party, which is the primary function of subrogation.