Which principle allows an insurer to recover costs after paying a claim?

The principle that enables an insurer to recover costs after paying a claim is subrogation. This principle allows an insurance company to step into the shoes of the insured after it has compensated them for a loss and pursue recovery from any third parties responsible for that loss.

In practice, when an insurer pays a claim to a policyholder, they effectively gain the right to seek reimbursement from the party that caused the damage or loss. For example, if a driver is involved in an accident where the other driver is at fault, the insurance company that pays the claim for the insured can pursue the at-fault driver's insurance for reimbursement.

Subrogation is crucial for maintaining the balance in the insurance system, as it enables insurers to manage their costs and helps keep premiums lower for policyholders. It also ensures that the party responsible for the loss ultimately shoulders the financial burden rather than the insurer or the insured.

The other principles mentioned, such as indemnity, liability, and contribution, do not pertain to the recovery of costs by the insurer post-claim payment. Indemnity focuses on compensating the insured to the extent of their loss, liability relates to legal responsibility, and contribution deals with situations where multiple insurers share the financial responsibility for a claim