What does the term "subrogation" help insurance companies achieve?

The term "subrogation" refers to the process by which an insurance company seeks to recover costs it has paid to its policyholder from a responsible third party. This typically occurs after the insurer covers a claim for damages or losses caused by someone else's negligence. By exercising subrogation rights, the insurer can pursue reimbursement from the at-fault party or that party's insurance, thereby minimizing their financial loss.

This process not only helps the insurance company recover funds but also can serve to maintain lower overall premiums for policyholders, as insurers can offset claims costs through subrogation. Additionally, it acts as a deterrent to wrongful parties by holding them financially accountable for their actions.

The other options do not align with the primary purpose of subrogation. Paying extra benefits, increasing premiums, and offering additional coverage options do not directly involve the recovery of costs from third parties, which is central to the concept of subrogation.