California Insurance Commissioner John Garamendi is expected to announce today that he is taking steps to make title insurers cut the rates paid by California homeowners.
Garamendi plans to hold hearings to examine title insurance premiums and, based on an upcoming study, expects “in the coming months to issue orders directing rates to be lowered to the levels at which they would be were this a competitive market.”
Garamendi is expected to release the study today, a 111-page report that concludes that three insurers control 75 percent of the state’s title insurance market.
“The report confirms that California homeowners and home buyers are being systematically overcharged because title insurers refused to compete with one another on the basis of low prices,” Garamendi said. The report was authored by Texas insurance economist Birny Birnbaum.
“These overcharges operate like a tax on home purchases and refinancing, pricing people out of the market and acting as a drag on the economy,” Garamendi said.
Garamendi’s upcoming report concludes there is little variation among the top six companies’ prices.
A LandAmerica representative said the company has not yet seen the report and will comment after having a chance to review it. A representative of Fidelity National was not available for comment. A representative of First American did not return calls by press time.
Garamendi’s latest actions with regard to title insurers flow out of his earlier investigation into such practices in California than ended with a $37.8 million settlement in July.
In the settlement, nine major title insurance companies agreed to pay $37.8 million in refunds and penalties for alleged illegal rebating in a settlement with California Insurance Commissioner John Garamendi.
The nine companies, members of three insurance groups — LandAmerica Financial Corp., the First American Title Insurance Co., and Fidelity National Financial — control roughly 75 percent of the California title insurance market.
The companies were accused of paying $25.4 million in illegal kickbacks to various lenders, builders and realtors in exchange for the referral of title insurance business. They settled without admitting wrongdoing.
Garamendi alleged that the companies paid kickbacks to lenders, real estate brokers and builders through an elaborate reinsurance scheme that he asserted drove up customers’ costs.
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