A federal agency’s report that calls for tighter oversight of the title insurance industry is “a terrific affirmation of … the need for greater transparency and the regulations we have proposed to bring healthy competition,” according to California’s insurance commissioner.
A U.S. Government Accountability Office study of title insurance industry practices concluded that regulators must step up enforcement efforts to ensure that pricing is competitive and that title insurers are complying with applicable state and federal laws (see Inman News article).
The report focused on the title insurance industry practices and regulation in six states, including California, and noted that California has settled or closed a dozen investigations into title insurance referral practices from 2003-06 and ordered title insurance companies to pay $61.3 million as a result of those investigations during that period.
“This report will further support our efforts and help serve as a catalyst for change within the title insurance industry in California and across the nation,” said Steve Poizner, California’s insurance commissioner, in a statement.
“The report specifically points to California’s proposed title regulations as an important tool in making certain title insurance rates are not excessive.” The GAO report stated that the premium paid for title insurance by consumers in Los Angeles increased 75 percent from 2000-05 while the premium rate per $1,000 of home price decreased 29 percent during that period.
Poizner and his predecessor, John Garamendi, have backed a proposal to institute a statewide title insurance rate cap.
The state’s Office of Administrative Law did not approve the proposed rate cap, submitted by Garamendi Jan. 5, citing mostly minor issues and the need to issue a finding that the proposed rate cap is “necessary for the health, safety or welfare of the people of the state.”
The office’s decision does, though, state that the state’s insurance commissioner does have the authority to “set the upper limit on rates that are not excessive.” State insurance code prohibits the commission from setting a fixed rate for title and escrow services.
The GAO report, according to a statement from the state insurance department, “mirrors (the department’s) own research that indicates there is not adequate price competition in the title industry,” according to the statement.
“The GAO also concluded that consumers play a very limited role in selection of a title insurer or agent, and that there are a number of reasons to believe that prices may be excessive. The GAO concluded that in order to determine whether title rates are excessive, it is essential for regulators to get more detailed information on agents costs, exactly what the California Department of Insurance proposed regulations seek to do.”