NAIC Eyes Overhaul Of Title InsuranceIndustry

Salt Lake City

Reacting to charges by Colorado and California authorities thattitle insurers paid kickbacks to secure business, state insuranceregulators said they will explore the sector's ratemaking and seekreforms.

Nebraska Insurance Commissioner Tim Wagner, speaking at lastweek's National Association of Insurance Commissioners springmeeting, said a possible review of the model law dealing with titleinsurance could be in order, but he was puzzled about how to goabout making revisions. “I have read the law and I don't understandhow you can create a rate for this line,” he said.

Colorado was the first state last month to disclose whatofficials said was a rampant pattern of title insurers payingkickbacks to developers and mortgage companies that referredbusiness to them.

According to regulators, the kickbacks took the form of premiumpayments for reinsurance that the title insurers bought fromcaptives operated by the firms that sent them business. Thereinsurance was for business that involved virtually no risk,regulators contend.

While some regulators say such deals raise the price of titleinsurance for all consumers, the insurers themselves and builderssay the payments are legal.

An overflow crowd attended last Monday's NAIC meeting of theTitle Insurance Working Group in which Colorado Deputy CommissionerErin Toll delivered a report on investigations by state insuranceregulators and attorneys general.

Florida Commissioner Kevin McCarty noted that the titleindustrys loss ratio is 8 percent. Mr. Wagner said that perhaps anoverhaul of the entire industry is in order, but could not specifyhow such actions would stop allegedly corrupt practices that aresaid to have infiltrated the industry.

Reproduced from National Underwriter Edition, March 17, 2005.Copyright 2005 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.