As you may know, there are a number of active background processes and services that help Windows run smoothly. Most of these background processes/services consume a minimal amount of CPU power and RAM. However, there are times when a process gets disrupted or corrupted and consumes much more resources than usual, leaving little room for other applications in the foreground. The Diagnostic Policy Service is one such process that has been known to overload system resources on rare occasions.
The Diagnostic Policy Service is one of the common Svchost.exe (Service Host) processes. It is responsible for detecting problems with various Windows components and solving them. The service tries to automatically resolve detected problems when possible and when not, it saves diagnostic information for analysis.