Diligent Search/Diligent Effort

What is a Diligent Search/Diligent Effort?

 

A surplus lines regulatory requirment establishing that coverage for a risk is unavailable from admitted insurers. The form (affidavit) to be completed confirming that an admitted carrier declined the risk.

 

Understanding Diligent Search/Diligent Effort

 

Surplus lines brokers are generally required to verify that a diligent effort was made to place the policy in the admitted market before a risk is placed in the surplus lines market. This standard exists to incentivize using the admitted market. In the admitted market, taxes are lower. Policy form is more competitive. Consumers have the right to appeal to the state if policies have been handled improperly. 

However, the general trend over the history of surplus lines regulation has been to lessen the regulatory burden caused by diligent search. There are currently many exemptions from the diligent search. However, they are not consistent from state to state, with the exception of the federal exemption in the NRRA. There are several states who have dropped the standard altogether and no longer require diligent search.

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