Reviews of the Forbes' Title Insurance Article
Forbes posted reader's comments on their Title Insurance Expose two weeks ago, an article on which I elaborated in an Open Letter to the Industry .
12 of the 15 comments were sent by those affiliated with title insurance companies. Here are a few excerpts that reflect their defensive tenor:
"FORBES has set a new benchmark low by denigrating the title insurance industry under the guise of an informative article" -
James R. Maher
Executive Vice President
American Land Title Association
Washington, DC
The facts and statistics in the article have already been publicly disclosed numerous times and the writer Mr. Woolley just aggregated these data (many items are posted within this list of articles and government reports on the title industry). He is not expounding anything new... it's just getting more publicity because in combination, these arguments pack a punch, especially in a widely read business magazine.
"This article was both disturbing and misinformed... The insinuation that a simple title search will replace the need for title insurance is absurd. Title insurance is a cost in our industry with a silent benefit no one sees until it is needed and then there is wonder that anyone would ever do a transaction with out it."
An Escrow Officer
Many of the comments did not get the point and seemed to think the article advocated the transformation (or $49.99 -ization) of the title insurance product. Title insurance will not go away... there will always be title insurance. The point of the whole article is its inflated costs.
"I assure you that I am no "Featherbedder." My staff and I work very hard to ensure that, as I say at all of my closings, "the seller has the right to sell the property and the Buyer has the right to buy the property." The fact that our industry pays out 5% or less of its premiums to settle claims is a testament to the skills and abilities to the Agents working in the field."
A Title Attorney
Again, the tenor of the commenters is "I work hard, and therefore title insurance is correctly priced (note: title and escrow work is very demanding). Only one feebly tries to explain why the margins are so high (From Forbes - "0f the cash First American collects for title searches and accompanying insurance, it hands 80% to its own agents and to independents") but she naively lumps all that huge margin into "overhead charges". This rationale is most evident in the last sentence of the title attorney above - 5% payouts are a testament to the "skills of the Agents working in the field" - doesn't that mean their skills hands them up to 80% commissions?!?
---oh, one more fact: the car insurance payout ratio is 86%... from a layman's point of view, wouldn't you think settling a car claim would have as much or more overhead than settling a title claim? There's a whole lot more of them.
"Honest, hard working title insurance agents should thank you for writing this article... The silver lining ... is the focus of consumers on their right to choose (their own title insurance provider)."
Diane Cipa
General Manager, The Closing Specialists
Ligonier, Pennsylvania
Diane's a fine blogger on title insurance and escrow and she gets the point that consumers must be aware of title insurance and find the most appropriate and best priced policy. Title insurance is much more simpler and plain vanilla than casualty or life insurance, so I have always recommended service and pricing as the most important criteria to choosing a title insurance provider... and so does Diane.
Of all the title-related commenters, Diane got the message.
Related article: Jeff, an Oregon title rep, also responds to the Forbes article
Technorati tags title insurance escrow real estate real estate settlement Fidelity Title First American real estate technology title insurance industry Forbes
While I agree that there are things about title insurance that could be made more competitive, I don't agree with the editor's claims that Mr. Wooley is simply "aggregating data" already presented. The article definitely had an agressive tone and both the writer and the editor should have expected defensive responses from the industry. Where was the author's analysis of overhead versus commissions, of the data showing comparing inflation and other factors to the increase in fees, or even feedback from legislators as to why laws have been written the way they have for the title insurance industry? That type of information would have significantly contributed to the legitimacy of this article rather than it appearing to simply be another case of a reporter trying to make a name for himself by riding the coattails of other recent press (the Washington State findings). I whole-heartedly agree that there are improvement that can/should be made but am very disappointed that the writer, and the editor, are trying to champion a cause (and perhaps simply generate controversy for the benefit of marketing) without producing more evidence and "hard facts". With more effort, the article could have likely been something much more substantial.
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Dear Title Insurance Professional, while your first comment was legitimate, your second one was not. I've blocked your ip address.
Author: Title Industry Professional
IP Address: 69.87.52.48
Email Address:
Home Page:
Comment:
While I agree that there are things about title insurance....
Author: Joe
IP Address: 69.87.52.48
Email Address: [email protected]
Home Page: http://www.patrickisadunce.com
Comment:
Kitano is a quack and has no freakin' clue what he's talking about. All these self-proclaimed "experts" on real estate processes probably couldn't tell the difference between a mortgage and a quit claim deed.
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Frankly, I find Pat Kitano’s opinions a breath of fresh air. Though he is not a title insurance agent and can’t be expected to know the intimate details of the profession, he is a real estate professional. He’s a salesman who sees the title industry making big marketing mistakes. It’s a free country and we have free speech and BTW, he’s right. The title industry’s marketing is lame, outdated, and misdirected.
The suggestions being offered and discussed on this site are positive. Take some good advice from someone who is on the right track and send the bad vibes back to ALTA and the other so-called leaders of the title industry who have made the bed we are lying in.
We wouldn’t have to be defending the product – title insurance – if we were marketing it honestly. Who can blame a reporter for failing to see value in a product that appears at face to be nothing more than a vehicle for payola? The graphic in the Forbes article says it all.
It kind of cracked my up because I had in mind a similar graphic but couldn’t draw because I don’t draw well. I envisioned a door with real estate agents and lenders standing collecting tolls. There was a long line of title insurance agents negotiating positions in line and trying to get through that door. What’s on the other side of the door? Consumers, of course. They’re all back there sitting at tables and chairs, talking amongst themselves, going about their business, completely unaware of the what was taking place on the other side of the door.
The interesting thing about this door is that it’s freestanding. It’s not attached to any walls. There is no real partition between the title insurance agents and the consumers. The consumers don’t know who those folks are milling about over there and the title insurance agents are standing in line because they’ve been taught this is the way business is conducted. It’s just how it is. [Thank you ALTA.]
So I’m standing there looking at the consumers and I turn around and say to a few title insurance agents, come on, there is another way. They look at me and ask, “Who are you and why are you talking to me? You’re a radical and I think you are crazy. Go away!” I look back and think, ok, do whatever you want to but I’m walking. This door thing is for the birds.
I’ve been in that room talking directly with consumers since 2000. Until this year, I have been minding my own business, but now we have the entire country looking at that door. You can’t look corruption in the eye without recognizing it. The country sees something is wrong and they want to fix it. I’m standing up shouting because we need to control the fix. Title insurance isn’t the problem, it’s the door and we can burn that baby.
Industry folks, you’ve been doing things this way for so long, you are blind. You can’t see the entangled referral web that is damaging consumers.
The gate ticket at “the door” adds no value to the services and product. It only
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The gate ticket at “the door” adds no value to the services and product. It only adds price. Consumers have been paying that price and it’s time to change.
The beauty of the media focus on title insurance is that we now have the consumer’s attention and we have cover for all the honest title insurance agents who were afraid to buck the system. Let freedom ring, folks. Let free competition thin the margins, find it’s real level. Consumers, by exercising their right to choose, knocking down that “door”, will fix the problem. We really don’t need the government to fix it. It will happen naturally as long as people keep talking about it. Pat Kitano, keep talking. You are doing a great service. Thank you.
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The biggest issue I take with the Forbes article is the extremely misleading $25 number that Woolley throws around.
It costs First American $25 a file to cover SOME areas of the country because of two things:
1) They have invested many millions of dollars to establish their own computerized, searchable title plant with copies of all the various documents that have been recorded in a large number of counties across the country; and
2) They have outsourced their title searching to India so they can pay much lower salaries to searchers.
Even if everyone went through this exact same process (who exactly was paying the money to accumulate plants in every county in the country?) you are still left with a title SEARCH.
A title search is the exact same thing that any person can get by going down to their local register of deeds and requesting copies of every doc on their property in a given period. You're probably looking at a hell of a lot more than $25 as most government bodies charge $1 per page, but that's beside the point. You are still left with a stack of documents that a lay person will generally have no idea how to read through.
Title Examiners go through that Title Search and turn it into the normal title commitments that are sent out to consumers laying out the requirements: you need to pay this, this and this off, your property will be subject to this, this and this restriction and you need to get a deed from this person who actually still has an interest in the property.
Title companies are being paid for their legal expertise in converting that stack of documents that you can get from your local Register of Deeds into a readable document that lays out what you need to do for this transaction.
One very important thing that I alluded to above:
Not all counties (and actually very few in rural areas) are computerized at all, much less for the 40 year period that is needed for the typical "marketable title" requirements of local law. Who is going to pay the massive amount of money for this computerization of these counties?
The reference to Iowa's state run title insurance was also fairly comical as he completely left out the majority of the costs involved. You basically have to go get a Title Search done, have an attorney review it and certify it (basically the title examination process) and then present it to the State of Iowa and they will insure it. All of which will costs you about the exact same as a typical title insurance product in any other state.
As for Diane's comments about this drawing attention to the bad apples in the industry - I really hope you're right. I can't tell you how frustrating it is to walk into a potential client's office and start talking about our company and suddenly have them ask what we can do for them - I mean we're getting a $100 gas card from XYZ Title every time. What are you going to give us? I would dearly love for that to be gone, but change has been promised before with no results
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Thank you Title Guy. You've just explained more about title insurance processes than any Forbes journalist who aggregates factoids from newspaper article snippets, CA Dept of Insurance Commissioner Garamendi speeches, and one interview with the head of a title company. Journalism itself is undergoing disintermediation. You and Diane Ciba are far more capable to provide insight into the title industry than any "reporter"... and you write well.
I've been kicking the idea about the new "open source" journalism is a series of articles over the last two weeks:
The Downfall of Traditional News Media
Blogging? You'll contribute to the New New Media
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