What does the "diligent search" requirement entail for surplus lines brokers?

The "diligent search" requirement for surplus lines brokers is designed to ensure that brokers make a significant effort to find coverage from admitted insurers before seeking insurance from non-admitted insurers. This comprehensive search for coverage from admitted insurers means that brokers must actively investigate and solicit quotes from various admitted insurers that are licensed to operate in the state. By doing so, they can demonstrate that the insurance coverage requested cannot be procured from traditional, admitted markets.

This requirement is essential for maintaining regulatory standards and consumer protection, as it ensures that non-admitted coverage is only used when absolutely necessary, thus ensuring that policyholders are informed about all available coverage options. The intention is to promote transparency in the insurance market, allowing consumers to understand the risks involved in choosing non-admitted policies, which may not be subject to the same level of regulatory oversight as those from admitted insurers.

Other options, such as a limited inquiry or filing paperwork, do not fulfill the required thoroughness of the diligent search process. Additionally, providing insurance claims management services falls outside the scope of the diligent search requirement, as it focuses on the procurement of insurance rather than post-sale activities.