A newly launched Web site claims it will save consumers money by increasing competition in the title insurance industry. But one industry expert says Get Title Insurance’s offers of cash “rewards” undermine such promises and may violate federal law.
Get Title Insurance, which launched July 31, helps consumers by providing them with multiple quotes from insurance providers, said Chief Executive Officer Larry Calinda, a former executive at United Title and Fidelity National Title.
Some competing title insurance Web sites operate on a lead-generation model, selling information consumers enter about themselves online. Titleinsurance.com, for example, sells leads to up to five title insurance providers.
Calinda said Get Title Insurance is different because it doesn’t place limits on the number of companies that are allowed to provide quotes to consumers. When a consumer submits a request for a quote, the information is distributed to all the title insurance companies that have signed up to serve that consumer’s ZIP code.
When the site emerges from a beta testing period, Calinda said, title insurance providers will pay $20 a month for the right to serve customers in 20 ZIP codes, $45 a month for 50 ZIP codes, and $75 for 100 ZIP codes.
“We don’t set a maximum number of (title insurance providers) in a given area that can provide quotes,” Calinda said. “If we limited it to four, five or six companies … that doesn’t allow for smaller agencies to be competitive.”
About 200 companies, ranging from small agencies and individuals to national underwriters, signed up to provide quotes through Get Title Insurance during a free trial period, Calinda said.
If a consumer receives a quote they want to follow up on, “we have online messaging, where they can submit questions back and forth, and ask for clarifications,” Calinda said. “So it’s not just a single transaction where the consumer says here’s my quote request, give me my quote. We feel it is a complete platform from start to finish.”
Consumers are asked to rate the companies they do business with, and any that attempt to engage in bait-and-switch tactics will be banned, Calinda said.
Jim McArdle, vice president of sales and marketing at AMC Settlement Services, said Get Title Insurance “creates a new avenue of business, going direct to the consumer.”
McArdle said the average consumer “is pretty uneducated when it comes to title insurance. If you’re not in the business, you probably don’t know much about it. I think (Get Title Insurance) will help in educating and in creating some competition.”
Although “the jury is still out” because the company is still in its infancy, “I think it’s an overall win-win,” McArdle said.
Regulators in a number of states and the federal Department of Housing and Urban Development have alleged a lack of competition in the title insurance industry and documented instances where illegal kickbacks and rebates were used to land customers.
Get Title Insurance promises cash payments to borrowers who purchase policies through the site. It calls the payments “rewards.”
Jack Guttentag, an Inman News columnist and professor of finance emeritus at the Wharton School of the University of Pennsylvania, said Get Title Insurance’s offer of cash payments to customers may violate the Real Estate Settlement Procedures Act (RESPA), which prohibits title agencies from compensating for referrals.
“How they square that with RESPA, I’m not sure,” Guttentag said. “If it’s done on a transaction-by-transaction basis, it’s a referral fee.”
Calinda said that the “rewards” to borrowers seeking title insurance don’t conflict with RESPA, in part because the payments are made from Get Title Insurance’s operating expenses — not by the title insurance companies themselves.
“RESPA speaks to whether a third party is influencing consumers to select a particular provider, which we do not do,” Calinda said. “If there is any (RESPA) issue we’ll change the model to comply. Our end goal is to provide good competitive environment where consumer can be educated, and get the best possible price.”
Even if Get Title Insurance’s “rewards” do not conflict with RESPA, Guttentag said, the practice suggests title insurance companies “are not being up front about how they are pricing, and how they are making their money.” Guttentag advocates that lenders, not borrowers, pay for title insurance policies that protect only their interests.