Comment Regarding Increasing Price Competition for Title Insurers
New York State Department of Financial Services, June 19, 2017
5 Pages Posted: 30 Jun 2017
Date Written: June 29, 2017
Title insurance is unique among insurance products because it provides coverage for unknown past acts. Other insurance products provide coverage for future events. Title insurance also requires just a single premium payment whereas other insurance products generally have premiums that are paid at regular intervals to keep the insurance in effect. Premiums for title insurance in New York State are jointly filed with the Department by the Title Insurance Rate Service Association (TIRSA) on behalf of the dominant title insurers. This joint filing ensures that title insurers do not compete on price. In states where such a procedure is not followed, title insurance rates are generally much lower.
Instead of competing on price, insurers compete on service. “Service” has been interpreted widely to include all sorts of gifts — fancy meals, hard-to-get tickets, even vacations. The real customers of title companies are the industry’s repeat players — often real estate lawyers and lenders who recommend the title company — and they get these goodies. The people paying for title insurance — owners and borrowers — ultimately pay for these “marketing” costs without getting the benefit of them. These expenses are a component of the filings that TIRSA submits to the New York State Department of Financial Service to justify the premiums charged by TIRSA’s members. As a result of this rate-setting method, New York State policyholders pay among the highest premiums in the country. Instead of continuing on its current course, the Department should seek to create a regulatory regime that best balances increased price competition with adequate safety and soundness regulation.
Keywords: real estate, title insurance, price competition, kickbacks, real estate practice, regulation, title agency, title insurer
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