What does the term "subrogation" in insurance refer to?

Subrogation in the context of insurance refers to the process by which an insurance company seeks reimbursement from a third party who is responsible for a loss or damage that the insurance company has already compensated the insured for. When an insurer pays a claim, it may then "step into the shoes" of the policyholder and pursue recovery from the party that caused the loss. This process is crucial because it helps the insurer recoup the costs of claims paid out, which can ultimately keep insurance premiums more affordable for policyholders.

B is the correct answer because it accurately describes the process of seeking reimbursement from a third party after an insurance claim has been settled. It helps clarify the role that insurers play in managing claims and financial responsibility after an incident. Other options address unrelated aspects of insurance, such as claim payments, policy creation, or cancellations, which do not align with the definition of subrogation. Understanding subrogation is essential for comprehending how insurance companies operate and manage claims efficiently.