Diligent Search requirement and deregulation

[cgott42]

One benefit listed is that it will help surplus lines insurers to offer more competitive products.

Q - since it's the insured / broker that must perform the diligent search before being allowed to place the risk with surplus insurers, how does it affect the surplus lines insurer and prevent them from offering lower prices? They're not paying the costs of the diligent search.

I'm assuming "competitive products" means lower prices

[Present Value]

I think, the surplus lines insurers will not be able to provide same coverage at lower price if the dilligent search criteria is in place. This is because, admitted insurers will not decline as much since they have higher prices.

[cgott42]

I thought the diligent search rejections are because the standard insurers are UNABLE to insure the risks - don't have the expertise to do so.

[Present Value]

One of the reasons is "unable". In which case you are right, it does nothing to increase competitiveness. But other reasons include, the quoted rate is unjustifiably high, or not on the classplan, or an exposure so unique that even if they do know the price its too high to charge. So when someone gets rejected by the standard insurers "only" then can they go to surplus line insurers. Don't you think without the diligent search criteria they could just shop around and find a surplus lines insurer who was willing to provide coverage irrespective of whether or not any standard insurer was providing it?
Let's say you want to buy a pen. If I were unable to amnufacture a pen (as you say), then right there is no increase in competitiveness. Suppose you can buy it from a Surplus lines pen manufacturer for $5 only if I refuse to sell it to you. So I don't refuse, and keep quoting $10 as this price (note in this case I am not unable, I am just not willing to sell it at $5). Would you say the pen market is competitive? Now, if the diligence search criteria is removed, do you think I could get away with charging $10?