What does the "diligent effort" requirement entail?

The "diligent effort" requirement is fundamental in the surplus lines insurance process. It mandates that an insurance broker must make a reasonable attempt to place an insurance risk with admitted carriers—those that are licensed and authorized to conduct business in the state—before turning to surplus lines providers. This provision is crucial because it ensures that brokers have explored all possible avenues to secure insurance coverage within the traditional market, thereby protecting consumers and ensuring that insurance options from admitted insurers are exhausted first.

Understanding this requirement is essential because surplus lines insurance is typically used when standard insurance markets cannot provide adequate coverage. By demonstrating a diligent effort, brokers can justify the necessity of placing the coverage with a surplus lines insurer, which is often associated with higher premiums and less regulatory oversight than admitted carriers. This requirement emphasizes the importance of exploring all available options and showcases the commitment to ensuring that consumers receive every chance to obtain coverage in the regulated market before seeking alternatives.