A title insurance organization testified today that the California Insurance Department's proposed regulations for a cap on its members' rates will harm small companies.

The California Land and Title Association urged the department at hearing in San Francisco to drop the rules saying they would "devastate small title companies at a time when the cyclical nature of the real estate market is already softening."

Last month Insurance Commissioner John Garamendi proposed the new regulations that he said could lower the amount state residents pay to title insurers by $1 billion.

The commissioner said the dysfunctional pricing system title companies use is virtually unrelated to the cost of their services-based as they are on the cost of the property in question.

The proposed regulations include a proposal to set interim maximum rates based on each company's rates in 2000, before the sharp rise in home prices.

The result, the commissioner said, will be an immediate reduction of 23 percent for rates for a home purchase. In 2008 the commissioner will require the companies to report their costs in order to set reasonable rates.

Little or no competition exists in the state's $4.5 billion title insurance industry, the commissioner said, quoting studies including one he commissioned.

But title insurer representatives disagreed.

"Insurance Commissioner John Garamendi's proposed regulations will have a significant anti-competitive impact as California's small title and escrow companies are driven out of business by their inability to remain financially viable," said Craig Page, California Land Title Association vice president and legislative counsel.

CLTA urged the Commissioner to withdraw his regulations and work with a wide variety of groups and individuals to consider alternatives.

The group said he should seek a solution that benefits consumers without "crippling an industry that provides a vital service to buyers and sellers of real estate in California."

Title insurers' charges have been under regulatory scrutiny since investigations in various states turned up evidence of what authorities said were kickbacks to developers, realtors and others who funneled business to the title companies- leading to inflated prices.

According to Mr. Garamendi, "a system so rife with illegal kickbacks and gratuities essentially forces homebuyers, and those looking to refinance, to pay excessively high premiums."

He also noted that he had fined companies $1 million in the past year in connection with their "illegal schemes."

"But to these companies, given their excessive rates, a $1 million fine was merely a small cost of doing business," he said at the time he proposed the regulations.

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Calif. Title Group Blasts Rate Cap Rule Proposal

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