Reforms proposed to title insurance industry

Monday, April 28, 2008

 

California Insurance Commissioner Steve Poizner today announced efficiency reforms to the title insurance industry to reduce extraneous costs from the system by prohibiting inappropriate kickbacks by title company marketing representatives.

"Improper kickbacks and other excessive marketing costs are being passed directly onto the consumers," said Insurance Commissioner Poizner. "These reforms will limit the amount spent by title insurance marketing representatives to $25 per person per year, eliminating abuses and excess costs in the system. I expect that these savings will be passed on to consumers. I will continue to search out inefficiencies in the insurance market to help bring the lowest possible rates to California consumers."

Specifically, the reforms will:

  • Limit marketing payments to individuals to no more than $25 per person per year. A strict limit on inducement payments is necessary to eliminate excess costs. 
  • Require insurers, UTCs, and controlled escrow companies to identify the specific individuals who market their products and to provide the Department with detailed records on their marketing expenditures. The major source of excess cost in title insurance is excessive rebates and inducement payments by title insurance marketers. These regulations will allow the Department of Insurance to track the practices of individual marketers and hold them responsible for obeying the laws restricting these excessive payments. 
  • Require companies to provide detailed information to the Department of Insurance regarding their affiliated businesses. When title insurance companies obtain business from or refer business to affiliated businesses, there is a potential conflict of interest. The law currently requires title insurance businesses to obtain more than 50 percent of their business from unaffiliated sources. This rule will allow the Department to enforce that law.

Insurance Commissioner Poizner proposed these reforms at the 2008 California Land Title Association convention in San Diego today. The department expects to propose regulations to reform the regulatory structure of the title industry soon.

 

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