|
Should We Allow Consumer Incentives on Title Insurance?
by Robert Franco
 | 2007/08/07 |
I have always thought of the filed insurance rates as a consumer protection device to keep title insurance companies from over-charging customers who normally do not select their title company. But... what if the title company wants to charge their customer LESS than the filed rate? Wouldn't that be good for consumers?
New Jersey Senate Commerce Committee is currently reviewing S-2229, which would allow title insurers and their agents to offer rebates, discounts, and other incentives to their consumers notwithstanding the filed rates. Currently, they may not "pay... as an inducement to insure, or after insurance has been affected, any rebate, discount, abatement, credit or reduction of premium or special favor, advantage, or other benefit.. or valuable consideration or inducement... not specified or provided for in the policy, except to the extent provided for in [the filed rates]."
S-2229 would add another exception for offers to a person purchasing title insurance, who is not required to use the offering title insurance provider, and it prohibits the savings from being added to any of the person's other costs.
According to an article on NJBIZ.COM the New Jersey Land Title Association opposes the bill, along with some area agents.
Source of Title Blog ::
Led by the New Jersey Land Title Association, a trade group in Freehold, opponents of the legislation say it would give large companies the power to dominate the market.
...
Carl Samson, president of the New Jersey Title Insurance Co. in Parsippany and the immediate past president of the New Jersey Land Title Association, says the bill would create “an unlevel playing field” because “smaller companies can’t compete when there are predatory rates.”
Kathleen Lockwood, president of Stewart Title of Central Jersey in Freehold, says the legislation would be especially harmful during lulls in the housing market. “Here in New Jersey, we’re having a significant downturn,” says Lockwood. “Competition is already fierce enough [without title insurers being able to offer lower prices].”
But not everyone thinks that allowing title agents to offer incentives to consumers is a bad idea. MyClosingSPACE.com would like to charge the same $99 fee they charge in other states, but the current New Jersey legislation sets the minimum at around $185. According to MyClosingSPACE.com's Website, the company has offices in New York, New Jersey, Florida, and Pennsylvania. The company has a unique approach to pricing, with an all inclusive fee that includes recording costs, loan policy, owner's policy, and endorsements. They handle the settlement for $299 (closing services in NJ are $300 due to state regulations), and they offer convenient closings "any place, at any time." They also do not charge wiring, overnight, courier, or notary fees.
There is much to be said for such transparent pricing, unfortunately, the filed rate structure in many states makes that difficult. I have often thought about offering a flat fee of some sort... after all, the cost of actually producing a title policy is relatively the same on a $50,000 property as it is a $500,000 property. Obviously though, the risk incurred by the underwriter does increase and they would still need to collect their share of the appropriate premium.
I have considered some type of premium-only arrangement. On a $500,000 sale with an owner's policy and loan policy, that would be feasible. However, on the $50,000 refinance with only a loan policy it would not be possible. There would have to be some sort of a minimum policy amount where below that amount you would still charge the exam and closing fee on a graduated scale, but when you start charging different fees for different borrowers you start to run afoul of RESPA.
RESPA is one of my concerns with the New Jersey bill. It seems to allow for inducements which may violate Section 8 of RESPA, unless you have an AfBA, which is exempt from such provisions. Would it be possible for New Jersey to expressly allow something prohibited by RESPA?
I also worry about what "discount pricing" would do to the quality of work that goes into creating the policy. As more agents fear competition from lower priced agents, they may begin to cut even more corners than seems to be the norm in the industry already. I believe that the quality of the product has suffered as the underwriters have lowered their search requirements over the years. Consumers aren't getting the value they used to get when they purchased title insurance. Could we see that further eroded with "special incentives?"
In my opinion, title insurance doesn't need to be cheaper - it's not over-priced. It needs to be better - it's over-valued. We really should be more concerned with providing the consumer with the peace of mind they used to get by providing them with more traditional services that placed a high regard on a thorough search and clear title.
Robert A. Franco
SOURCE OF TITLE
rfranco@sourceoftitle.com
Categories: Competition, New Jersey Legislation, RESPA, Small Agents
1139 words
|
5440 views
|
|
|