Subrogation
Subrogation is the legal right of an insurer to pursue a third party that caused an insured loss, after the insurer has paid the policyholder's claim. The insurer steps into the policyholder's legal position to seek recovery of the amount paid.
How subrogation works in practice
When your insurer pays your claim, you receive up to your policy limit for the covered loss. If another party was responsible for that loss — for example, another driver who hit your car — your insurer has the right to pursue that party (or their insurer) to recover what they paid out.
From your perspective as the policyholder, the process is largely invisible. You make your claim, you are paid, and your insurer handles any recovery action in the background. You do not have to pursue the third party yourself.
A practical example: you are involved in a road accident caused by another driver. Your motor insurer pays for the repairs to your vehicle. Your insurer then contacts the other driver's insurer to recover that cost. If full recovery is achieved, any step-back applied to your no-claims bonus is typically reversed.
Your obligations under subrogation
Most policies include a cooperation clause requiring you to assist your insurer with any recovery action. This means:
- Not settling with or releasing the responsible third party before your insurer has paid you
- Providing documentation, statements, or evidence your insurer needs to pursue recovery
- Not taking actions that would reduce the insurer's ability to recover from the third party
If you independently settle with the responsible party before your insurer pays out, this can complicate or void your claim. Contact your insurer first if you are considering direct settlement with a third party. For guidance on the conditions section of your policy — which typically contains cooperation requirements — see our policy structure guide.
Subrogation FAQ
Frequently asked questions
- It can, initially. If your insurer pays out and then pursues the third party, full recovery of costs typically means your no-claims bonus is restored. Partial recovery may still result in a step-back in NCB. Your insurer should inform you of the outcome of their subrogation action. See our guide on no-claims bonus for more detail on how claims affect your discount.
- Some contracts — particularly construction or commercial lease agreements — include a 'waiver of subrogation' clause, requiring you to waive your insurer's right to pursue a third party after a claim. Before agreeing to such a clause, check with your insurer: agreeing to waive subrogation without the insurer's consent may void your policy or affect your claim. This is particularly relevant in business and commercial insurance.
- If you receive compensation from the responsible party before or after your insurer pays out, your insurer is generally entitled to recover what they paid from that amount. You cannot be compensated twice for the same loss — this principle (indemnity) underpins how insurance works. If you settle with a third party independently, inform your insurer before doing so.