What term describes the process by which an insurer seeks reimbursement from a responsible third party for paid claims?

The term that describes the process by which an insurer seeks reimbursement from a responsible third party for paid claims is subrogation. This process occurs after an insurer pays out a claim to its insured due to a loss. When the loss is determined to have been caused by another party's actions, the insurer has the legal right to pursue that third party to recover the amount it paid to its insured.

Subrogation is crucial in insurance because it helps to ensure that the financial burden of the loss falls on the party that is actually at fault, rather than on the insurer or the insured. This process not only allows the insurer to recoup some of its losses but also helps keep premiums lower for policyholders, as insurers can offset claims costs through successful recovery efforts.

Other terms may relate to aspects of insurance but do not specifically describe this reimbursement process. Liability refers to the legal responsibility for causing harm or damage and is not a process of recovery. Indemnification is the act of compensating for loss or damage, which is typically what the insurer does for the insured but does not involve pursuing a third party for reimbursement. Exoneration relates more to relieving someone from responsibility or blame, rather than a financial claim recovery process in insurance.