Term Of The Day – Due Diligence
The Due Diligence is one of those overused terms in insurance, especially Risk Management. The term was started with the post stock market crash and resulting depression. Congress passed the Securities Act of 1933. The term was born out of that Act.
Due diligence was mainly aimed at stock broker companies and their employees. The brokers were charged with the responsibility of making sure they researched a stock thoroughly before they recommended it to clients.
To me, the term means going above and beyond the efforts of an average prudent person when recommending any type of financial transaction. In Workers Compensation, for example, the broker/agent is charged with exercising due diligence in recommending one policy or insurance program over others.
The insured has relied on the agent to perform a search above and beyond what the insured would have done in the same situation. The insured has relied on the agent to make sure all loose ends are tied up before policy renewal. The agent earns a commission for those efforts.
As a Chartered Financial Consultant, I am charged with always practicing with a level of “covering all the bases” before I recommend any type of workers compensation reduction strategies.
Due diligence was at the heart of the bid-rigging investigations in the mid 2000’s. The lack of due diligence was very apparent in certain Workers Comp insurance situations.
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