What must insurers consider when recovering losses through subrogation?

In subrogation, insurers seek to recover costs from responsible third parties after they have paid a claim to their policyholders for a loss. The consideration of the amount of recovery relative to the total loss is crucial because it helps insurers determine whether pursuing subrogation is worthwhile. Insurers assess the potential recovery amount against the total payout made to the policyholder to ensure that the effort and costs involved in pursuing subrogation do not exceed the financial benefits. If the expected recovery is minimal relative to the loss, it may not justify the time, resources, and legal expenses needed to initiate and pursue a claim against the third party.

While the type of insurance policy and the policyholder's claim history are important factors in underwriting and managing overall risk, they are not directly influential in the decision to pursue subrogation once a loss has occurred. Understanding the relationship between the insurer and the third party might aid in strategizing the approach to recovery, but ultimately, the financial aspect of recovery compared to the total loss is the decisive factor that drives the subrogation process.