Registered Insurance Brokers of Ontario (RIBO) Practice Exam

What is subrogation in the context of insurance?

1. The process of settling a claim

2. The attempt to recover costs from a third party responsible for a loss

3. The endorsement of additional coverage

4. The calculation of premium adjustments

The correct answer is: The attempt to recover costs from a third party responsible for a loss

Subrogation in the context of insurance refers specifically to the process where an insurance company seeks to recover the costs it has paid out on a claim from a third party that is deemed responsible for the loss. This concept allows insurers to "step into the shoes" of the insured, enabling them to pursue recovery from the party at fault. It is a crucial aspect of managing claims and ensuring that the responsible parties are held accountable for their actions, ultimately helping to keep insurance costs in check for policyholders. The other options provided do not align with the definition of subrogation. Settling a claim involves the process of determining the compensation owed to the insured and does not specifically relate to recovering costs from third parties. Endorsing additional coverage pertains to modifying a policy to include extra protections, which is unrelated to the recovery of funds. The calculation of premium adjustments focuses on determining the cost of premiums based on risk assessment and is not connected to the mechanism of subrogation.