Title Insurance Exposed! An Open Letter to the Title Insurance Industry

(These five title insurance companies above and their subsidiaries controlled 92% of all title insurance underwriting in the US in 2004)

In its upcoming issue, Forbes publishes an exposé on the title insurance industry's outlandish margins that seem so obvious to anyone associated with real estate. It's an "On The Cover" story and the first impact article I've seen about the industry from a major business magazine.

I've been making waves about the title insurance industry for the past couple of years so I don't need to comment on the article, it's an aggregation of these various well known facts and news items - the industry has unbelievable 5% payout ratios, kickbacks/gifting do happen, record profitability is almost analogous to the oil companies' last quarter earnings.

Instead, I'll propose what title insurance companies should do next in this open letter to them (pardon the length of the article, you may want to print it out):


Dear Title Insurance Companies:

In California, you've been under pressure from Insurance Commissioner John Garamendi to lower your rates that have been escalating proportionately with our booming housing market over the past five years. He's threatened legislative action to lower the rates, but it's possible you'll get a reprieve from the next insurance commissioner to be elected next week here.

With graphs (c/o of the Forbes article ) like the above educating the consumer, some sort of rethinking is going to happen. Parker Kennedy, CEO of First American Title , reveals as much with this quote from the Forbes article:

"Today anyone can instantly learn a property's square footage, its sales price history, even view satellite photos, at virtually no cost. If records are instantly accessible and accurate, the need for title insurance will fade away. "Eventually insurance won't be an important component of the product," he (Kennedy) allows."

Yes!! that said...


The above chart basically demonstrates title insurance is cut and dried, a cash cow, and usually gets done without any hitches... it's a perfect business. Here's where it gets difficult... I believe in most states, title insurance companies also manage the settlement processing - escrow and the other vendor services required to close a transaction. Although title insurance usually gets done without any hitches, problems consistently occur in the escrow processing and every Realtor knows this.


From my experience managing a real estate settlement company, the two main bottlenecks to closing a transaction are in the escrow processing and the lender processing. Unresponsiveness on either end will delay closes.

For title companies, great individual escrow officers (and their teams) are the keys to successful closes. Individual? Not system? The reality is every escrow is completely unique and treated as such by an EO. Their clients all have different ways they want to work... it's very customized - some want their payoff demands and instructions written a certain way and presented at certain times during the transaction, and that personalized knowledge is one of the relationship binders between the EO and client.

Most escrow officers are still processing their escrow using paper and pencil and postit notes... that means all details about a particular escrow resides in that EO's brain and all that postit note data is not shared electronically. EOs do have systems, mostly for tracking the escrow, but they do not have the time or resources (or sometimes, the technical wherewithal)  to enter the transaction details beyond the checkboxes and the five word notes that characterize an online escrow management system. So what happens when that EO is at lunch or sick or on vacation? The client has to get used to another EO or assistant who may not understand their "system"... when deadlines are coming up, the angst factor does too.

The upshot is simply there are good EOs and bad EOs. The current systems just aren't there to make a consistent, efficient "McDonald's" experience of the escrow and the best title companies can do is to hire the best EOs they can. I've been in the industry for three years, and have not heard uniform praise for any title insurance company's service... it's always "this office or EO is great" or "avoid that office"...


OK, here's the solution title insurance companies - you focus too much on the revenue generation side... milking the cash cow. Your management of the title insurance side seems to have more strategic say on what parts of the business need preservation. When there is a downturn in business like the beginning of this year, the main complaint I heard was that your escrow processing suffered because settlement services, which is your cost center, downsized drastically. Cutting overhead in a downturn is a rational decision, but it should be done surgically so that your services can actually perform better with the reduced amount of business, not worse.

From here on, you must understand settlement servicing is key to holding the client now because you will soon be downsizing on the revenue side... there will be less title reps and offices to cover your client base (I know title reps who have a daily route that takes them into the same office 2-3 times week just for face time) and you will need to justify why your services are valuable beyond coffee gossip and donuts.

It's simply a matter of strategic focus on developing the settlement side - build the systems that make your EOs and their teams more efficient and ensure their transaction data are online so when they are sick, it's easy to figure out what the status of their deals are. Hire great EOs, but more importantly recruit educated EOs - right out of college is best (and I know you're just starting to do this, but really, this should have been an HR strategy 30 years ago).  Think about it, an EO has one of the most demanding, organizational time sensitive job in the settlement business - it's great training ground for any ambitious real estate career.

Oh, and institute a 2-hour maximum callback policy plus 24-by-7 service... I've done that and btw, the only calls coming in on weekends are Realtors who just worked out a purchase contract and want to open escrow , or a call about whether a Monday morning signing is confirmed...

Finally, this should be the easy part (but I can't figure out why it isn't) - get a prelim title report to the real estate professional within hours, not days. I heard one of you had a centralized prelim processing plant that had an assembly line of prelim processors checking off on prelim details in order (I can visualize the paperwork moving from desk to desk now) and that's why it takes you a minimum of two days to get a prelim out. If you can solve this problem (and I know some of you have), then I and other Realtors (here on in, I will use the term Realtors to include all real estate professionals) will assume your systems are GO! and we'll work with you.


I won't address this area too much, but it's a simple effective business strategy to provide your Realtor client with a comprehensive set of services - appraisal, home insurance, technology solutions, risk mitigation, analytics. Most of you understand this and are on board. This should be a continuing focus because you have already captured the client and can upsell them easily.


I queried Chicago Title's branch directory for the number of branches in California, and it returned 236 offices... I didn't go through them all and some branches for title and escrow may be in the same building... but that's still too many, and Chicago is just one of the many title companies under the Fidelity National Title Insurance umbrellas. Cut to the chase, consumers know there are title insurance branches in almost every neighborhood, usually clustered together in high trafficked (expensive rent) intersections... and many of these offices are pretty luxurious because the industry has always promoted prestige marketing to their image conscious Realtor client base.

Historically, the reason for a branch in every neighborhood was to lock up the local Realtors... the convenience factor. You've been able to support the overhead during the fat years, but I'm going to bet that leaner years will force closings... and that's what should be done. If you continue to say we don't foresee leaner years, please refer to Parker Kennedy's quote above.

Realtors will get used to the idea of having their escrow officer 10 miles away instead of next door, after all, almost all of the communication between your EO and the Realtor is on the phone and by email... they maybe only see you at the signing and it's quite all right to have your client drive an extra ten miles to do that; if not, get your EO to drive the ten miles... I just said service was key to your offering.

Oh, don't even think closing your Sausalito office will leave a big gaping hole for cannibalizing Sausalito competitors. If you did it right, your clients will follow the EO to San Francisco and your competitor will eventually lose so much money you'll acquire them for their best EOs and close the office anyway.


Title insurance reps - you hired them for their sales skills and there are a lot of them. They are your liaisons who offer your basic set of services, like farming, assembling local marketing materials for your presentations and weekly donuts along with the title insurance order. Here's a revealing fact from Forbes about how well those reps and other "liaison" contractors are compensated -

"Of the cash First American collects for title searches and accompanying insurance, it hands 80% to its own agents and to independents."

However, title insurance and their associated services are now commodity-like. Repeat, it's ALL THE SAME... car and life insurance are way more complicated products. I myself can put together a farm for anyone who asks because I have access to a title database.  The best title reps now differentiate themselves through "above and beyond" service - quick problem resolution, networking client leads to the Realtors and mortgage brokers they service. They act as business builders for your clients and are keepers... but...

But you don't need most of your title reps any more... one reason is you'll probably start closing those ubiquitous offices and don't need that staffing. The Title Rep will be replaced by a "Business Development Consultant". This is exactly what all those desperate newly minted as well as veteran Realtors need... someone with expertise in building a Realtor's business and pipeline in this new era of real estate marketing, not someone who will call up their Title Support Department and request farm packages. Anyone can pick up a phone.

You already have some Business Development Consultants on staff already, you just don't see them as such. You've hired tech guys to help Realtors with their PCs and their problems with them... it's a simple service that binds many a Realtor to your company. Unfortunately, they are not trained to upsell...

You need to find better qualified Business Development staff who understand the best of breed in real estate marketing and technology that will help your Realtor client succeed. You need people who understand the sea change that's happening in real estate. This is one industry where I will actually recommend MBAs and management consultants because title insurance management is and has been entrenched in managing an insurance franchise, not a real estate marketing or technology concern, and I bet it's really hard to gain any consensus on these new strategic directions at the board level.

Again, First American's Mr. Kennedy:

"So Kennedy hopes to harness digital technology to create a new business. Rather than broker one piece of information for an exorbitant cost, he hopes to collect all manner of real estate skinny and sell it to banks, insurers, real estate agents and direct marketers."

Read this carefully, Kennedy seems to be proposing a completely different business model that transitions his company from "insurance" to "INTERNET" or even a "MEDIA" company. (yes, internet, the best media for data distribution). This is a real stretch... especially for an industry that has been slow to embrace technology.

Back to what your sales force should begin to look like... Simply put, I'm positing that the title insurance company's new Business Development Consultant is going to provide their Realtor clients expertise in internet based technologies and effectively applying it to their real estate marketing. The Consultants seed the Realtors' success and they start acting like high value-add consultants, not reps, with no need to adhere to a weekly face time route... which is a complete waste of time.


Finally, let's say your new business model does indeed transition to data distribution. Now you're not only marketing to your existing client base of Realtors but other recipients of your data "skinny"... finally, you need to market to the ultimate buyer of your product - the Consumer!

Fact: you title insurance companies have never marketed to the consumer. Period.

Take a lesson from the pharmaceutical companies, the best example of an industry that also did not market to the ultimate buyer, but to the provider of the prescription, the doctor. Pharmaceutical marketing to the consumer started in the 1990's only because the drug companies realized that certain medical problems - mental problems, erectile dysfunction, sleeping aids - were hard or embarrassing for the consumer to disclose to their medical professional. The now famous drug ads, including Bob Dole for Viagra, persuaded consumers to ask for these drugs by name, which their doctors gladly prescribe (analogous to writing up a title insurance order) because they get the business. In other words, drug companies courted the consumer because it finally made business sense to them.

There's one major difference between drugs and title insurance - drugs are symptom or illness specific, title insurance is a commodity. All the more reason for the most enterprising title insurance companies to start branding their name to the consumer... it's Marketing 101 ... if all title insurance is perceived as the same, a commodity product, the most visible brand name will win - ask P&G why Tide is the #1 detergent. This is a complete no-brainer. Consumer marketing is just one more discipline that title insurance companies will have to learn...


I'm not at all a detractor of the title insurance industry... I work with them... I like the business tremendously because the title companies own their Realtor client and can develop lucrative business models around that fact... they just don't know how to do that in the New World yet. Their outmoded business models are fading with the new transparency in real estate transactions. I consider myself a uniquely positioned change agent who combines working knowledge of real estate and technology with a bird's eye view garnered from an extensive business strategy-oriented career.

Related articles:

Big Opportunity for Title insurance Companies to market to the Consumer
Calilfornia Dept of Insurance Commish Garamendi continues attack
Links to Topical Articles on Title Insurance and Closing Costs
Gettitleinsurance.com - a New Title Insurance Business Model

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What did you think of this article?

  • 10/30/2006 11:44 PM The Phoenix Real Estate Guy wrote:
    [...] Pat Kitano is new to the blogosphere but is taking it by storm. His mission? To make sure everyone involved in a real estate transaction understands all its moving parts.” And he does a damn fine job of it. Hard to find just one gem here too, so I just picked the most recent post, a masterpiece on title agencies. Brilliant. [...]

  • 11/1/2006 4:27 PM Three Oceans Real Estate wrote:
    [...] Patrick Kitano over at Transparentre.com has a thought-provoking article on changes in the title and escrow business wrought by technology and the changing market. It’s a must-read for title reps and indeed for everybody in the business of providing ancillary services to Realtors and their clients — that would include mortgage folks, property and pest inspectors, and contractors and other tradespeople. [...]

  • 11/19/2006 5:57 PM Commerce Bucket wrote:
    Changes are due in the title-insurance industry
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  • 10/29/2006 12:11 PM Jeff wrote:
    Powerful, Provocative, Practical, Honest, Articulately Independent...and long overdue.
    What a post Pat....
    Reply to this

  • 10/29/2006 1:41 PM Kevin wrote:
    Very insightful and thought-provoking. A must-read for everybody in the business of providing value-added services to us Realtors.
    Reply to this

  • 10/30/2006 5:05 AM teresa boardman wrote:
    Excellent piece Pat! and long over due. I don't know much about insurance but I think many of the same points could be made about auto insurance, home owners insurance and medical insurance. - - especially when it comes to "milking the revenue side"
    Reply to this
    1. 10/30/2006 6:40 PM Pat Kitano wrote:
      The title insurance industry payout ratio is only 5%. That means for every $1,000 in premiums paid, the title insurance companies payout $50 in claims. For perspective, the car insurance payout ratio is 86%. Some insurance markets are just more conscious of the consumer - everyone rich or poor needs a car and our laws require car insurance - so the car insurance industry can't gouge because it's almost acting like a public service.

      The title insurance industry has always been invisible to the consumer, and it has operated without much consumer awareness or watchdog groups. Interestingly, insurance rates must be registered with the Department of Insurance but this agency oversees rates like most government agencies... it only reacts to consumer outcry. California's Insurance Commish started cracking down last year, but his detractors claim his positioning as a "consumer advocate" only gave him a political springboard for his run for California Lieutenant Governor (election next week). That's why milking happens... it's analogous to the record profits by the oil companies last quarter - riding the revenue wave.

      Reply to this

  • 10/30/2006 3:23 PM Terry Smith wrote:
    Pat, Interesting....
    Title companies are regulated here in Texas and fees are minimal. No wonder CA is out of control...home prices, lending practices, and absurd title fees. Two years ago RESPA took care of the tile & REALTOR relationships by putting heavy fines, $10,000 for marketing for a REALTOR. It has leveled the field here, our escrow officer is 2 miles from our home office
    and is also a RE Attorney, we use him a lot! They just starting doing PDF files, this industry needs a tech genius to put it together for the new and improved RE of the future.
    Reply to this
    1. 2/10/2007 4:39 PM Anonymous wrote:
      I have been an Escrow Officer in Texas for quite a few years. This is such an interesting business. It is not like going to a store, applying for credit and then shop away. And believe me I have done that in a store. I have worked many long hours reading and trying to put together all the pieces so that the final product we issue is done as perfect as can be done.
      Reply to this

  • 10/30/2006 4:28 PM Diane Cipa wrote:

    Pat: I love this line and I hope you don't mind - I'll give you credit, but I'd like to use it on my blog.

    You've hit several critical points perfectly. You're not a title insurance agent so I can't expect you to be intimately familiar with the ACTUAL business of title insurance, but that's not your job. Title insurance professionals on the whole have been "out to lunch" from a marketing and management point of view. I started in a real estate sales office in 1973. In 1978 I went into mortgage lending. I've learned a lot over the years about sales, marketing, and managing an office. Frankly, when I started my first title agency in 1991, I was shocked at how the business was conducted. I never followed the typical model but rather, ran my business like a good mortgage dept. It's much more efficient. In 2000, I started a new title agency with a mission - REACH THE CONSUMER DIRECTLY, DEVELOPE A SET OF STANDARD PROCEDURES, AND FIND A RELIABLE METHOD TO HIRE THE RIGHT KIND OF PERSON. I firmly believe in the "McDonald's" concept. It is highly transferable to the title business. I've been successfully doing it since. My competitors can't figure out why we are always busy when their offices are dead. We are committed to quality and have high expectations. We understand that these are families, not files. There IS a better way but losing the underlying product, title insurance, is not it. Trust me my friend, you have good intentions and I can tell you care about your customers. The title insurance system is part of the infrastructure of the real estate system, like a good sewer. If you want to think about a life without title insurance, just think about raw sewage in the streets. It wouldn’t be a pretty picture.
    Reply to this
    1. 10/30/2006 6:01 PM Pat Kitano wrote:
      Diane, wish you were in California... yes, service is the key to success... and the definition of service (beyond successful closings, which should be a given) must be broadened beyond donuts.

      I got a chance to read a few of your replies to the Forbes article... your insights running a title agency are valuable because there are so few in the real estate blog space thus far... you're on my feedlist and blogroll.

      I agree with you on why title insurance is important... I just see the aircraft carrier needs to turn much faster if title insurance companies want to remain relevant as the real estate industry itself moves to an internet based platform. When I say that, I know real estate is local, but the processes - prospecting, pitching and processing - are moving online, and title companies can't afford "old fashioned" local marketing typified by donut rounds.

      (btw, Diane, my blog app couldn't add your company name The Closing Specialists to the Author name, so now everyone knows)

      Reply to this

  • 10/30/2006 7:38 PM Doug Lindstrom wrote:
    A very compelling post. As a former real estate agent in California, I always wondered about the lines most title reps would cross (i.e. lunches, marketing materials, etc). When I moved to Colorado, I almost expected the same. No way! Agents here have access to title reps but I pay (nominal) for my homebooks and other items that a title company usually handles.
    I have a clear conscience whenever I ask the title company(s) for information.
    As far as the percentage of premium versus payout, let the market decide. If enough people complain, one company will lower its fees, forcing the others to be more competitive.
    Reply to this
    1. 10/30/2006 9:07 PM Pat Kitano wrote:
      Thanks Terry, Doug and Diane,

      I'm pleased to find out there are states where RESPA violations are RESPA violations and a kind of non-porous money wall exists between the title reps and their clients. My friend/realtor Kevin Boer received a comment on his blog
      from Diane that pointed out (even chastised)  the common value-add services California title insurance companies provide to Realtors are RESPA violations and are verboten. We were surprised... they are custom here and every title company provides these services.

      I joked to Kevin that he should respond we live in carefree California baby, home of the greased wheel and the green handshake... Actually, our experience is completely different from yours... it's just the way it's done, as you know Doug... and only reinforces how local real estate can be.

      Trackback to Doug's article

      Reply to this

  • 11/1/2006 7:19 PM Diane Cipa wrote:
    Pat and friends: This is sure an interesting discussion. As more people join and start conversations all over the web and in the press, consumers in my market are waking up like magic. I like to take new customer calls at my office. I've been on the phone for two days and also fielding quote requests from the good folks at easytitlequote.com, titleinsurance.com, and gettitleinsurance.com. Everyone says "I'm shopping." It's like magic. It's a revolution. Pat, I think your letter really helped. This is an interesting "tipping point". You can almost feel it happening.
    Reply to this

  • 11/10/2006 8:59 AM Jeff wrote:
    Very well written...
    As a new Business Development Consultant for a title company here in Oregon, I'm constantly looking for new ways to provide value to my realtors and brokers. I just wish they were all as open to some of the new technology that is out there as I am.

    Again, great article. Our company viewed the Forbes article, and within a week had a copy of the response from First American that was sent to Mr Forbes, the Author, and the editing staff. I have copies if you haven't seen it...

    Take care,
    Reply to this
    1. 11/11/2006 8:19 AM Pat Kitano wrote:
      Thanks Jeff... I'd like to see the response copy you're referring to. I'm also pleased to help you in building your career in any ways possible. Do you market technology tools or services to your clients in order to attract business?

      Reply to this
      1. 11/13/2006 8:50 AM Jeff wrote:
        Here's ALTA's response:

        My company recently entered the Portland(OR) market, and prior to my arrival had more of what I consider an old school mentality when it comes to marketing and technology. It's worked in the past for the company, but as we all know, the times are changing and agents are beginning to open up to these new ideas, especially in our market. Any ideas you're willing to share, I'll soak up like a sponge and definitely pass on to my current and potential clients. Thank you!
        Reply to this

  • 12/27/2006 5:39 PM Josh wrote:
    Title Insurance is a ONE TIME Fee. This CANNOT be compared to other types of insurance (car, homeowner's etc.). The cost of premiums includes title work that is an integral part of every transaction. Without title work how would deed's get prepared?

    And I dont even want to get into the work title companies do on commercial deals. The types of endorsements requested and the underwriting that goes into the issuance is not as easy as many articles (Forbes included) makes things seem. I really think it is easy to jump on the what a ripoff bandwagon, but at least try and give a reason why. This is really a response to some of the others letters. I actually agree with post in many aspects.
    Reply to this

  • 2/11/2007 4:02 PM Brian Brady wrote:

    I agree with all that you say in this article. I spent 9 years lending in Phoenix where the title business is escrow driven. No need for title sales reps, just BDCs touting the EOs.

    The only thing I prefer in CA to AZ is the mobile notary; it frees up the EOs time and provides the consumer convenience. It should be incorporated into the escrow fee and (or reduce the escrow fee). A highly specialized loan signing agent saves transactions. A highly efficient EO makes transactions. A highly efficient TO is, well, expected.
    Reply to this
    1. 2/12/2007 9:32 AM Pat Kitano wrote:
      Good to hear your insights on the differences in settlement services and on how you like to work. Since you're in SoCal, you have to deal with separate title insurance and escrow companies... this actually makes the transaction more complicated and costly than in NorCal because you have two variables to work in harmony with instead of one title company doing everything.

      From your comments on mobile notaries, you sound like you would be amenable to a more "virtual" settlement processing experience as long as the service remains efficient and, well, perfect. Virtual settlement processing, which will coincide with the closing of bricks and mortar, is on the drawing boards.

      Reply to this

  • 6/12/2007 3:06 PM Thomas McFadden wrote:
    Title companies have tried marketing directly to consumers. You know what they found it. It does NOT work. I know people who are friends of mine, extremely knowledgeable about real estate, including some attorneys, and you know what? When they closed on a house they still simply followed the recommendation of their realtors and brokers when it come to which title company to use for the closing. If I can't get my closest friends to override the recommendations of settlement service providers, pray tell how is a title company going to convince complete strangers, through marketing, to close with that title company.

    The author is living a pipe dream. Anyone who has been involved in the title insurance industry will tell him that.
    Reply to this

  • 12/18/2007 3:26 PM Jim wrote:
    Although my response is a bit delayed, I am sure there are many who will still read it. I find it funny how we can choose to look at the title company’s profit on a transaction and feel that it is too much. Let's take the $1000 title fee scenario that was used saying the title company keeps 95%. Thus ,the title company would make $950 dollars on the title policy. That amount does not include that cost of searching the title, paying for the production of the title policy and many other costs that are involved. But that aside for the time being. If the title cost were $1000 then the property must have been in the $300,000 range. Each agent would have made $9,000 dollars for this transaction. And their cost would have been a few hundred dollars at most to sell this property. Many agents these days list the home in the MLS, throw some flyers in the flyer box and wait for the commission check to arrive. Not all are that way, but it seems to be more and more are. In Northern Cal most agents do not even attend the signing. They claim they do not have time. That is like hiring an attorney and the day you go to court he cannot make it. Now we get to the mortgage broker. Depending on the loan that the broker got the buyer into and how many fees the broker chooses to charge plus the rebates and the qualifications of the purchaser. The Broker could have made thousands on the transaction as well. Seems to me the hundreds that a title company makes on a transaction, pales in the comparison to the thousands other parties to the transaction makes.
    Reply to this
    1. 12/18/2007 11:26 PM Pat Kitano wrote:
      You've touched on three example of why the consumer believes they are being overcharged for inefficiently priced services. And that's why commissions are dropping and title insurance companies are laying off personnel. The industry is developing more streamlined business models - for title insurance companies, it's transitioning from the inefficient high touch title rep (with donuts) model to a data delivery model. If you're a title rep, like travel agents, your days are numbered if you don't understand the data delivery business.

      Reply to this

  • 5/28/2008 4:39 PM Robin wrote:
    I've found that using an attorney is the best, and most efficient way to go about getting the best rates. The other ways are just too time-consuming.
    Reply to this

  • 6/30/2008 7:36 AM Hunter Jackson wrote:
    Although I agree with Jim, my thoughts are, this is america...charge what you can get. If you can't get it, its your fault and you should either lower your price or go out of business.
    Reply to this

  • 9/12/2008 10:08 AM Home owners insurance wrote:
    I think the best possible solution for this is to consider and adjust real insurance quotas, to consider real people's needs and to approach win-win solutions as there are thousands of people who believe that insurances are almost unbearable. This is alarming and needs to change.
    Reply to this

  • 12/13/2008 6:51 PM John wrote:
    I think the representation aspect of closing with an attorney is the wiser way to go.
    Reply to this

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