The title insurance reckoning

What will the state’s sweeping new regulations mean for the notoriously opaque industry?

Feb.February 01, 2018 11:00 AM

Madison Square Garden, just one of the many venues that title insurance agents use to entertain clients.

Lavish parties, VIP tickets to sporting events, golf outings and occasional nights out at “gentlemen’s clubs” have defined New York’s title insurance industry for years. But the industry may soon be turned on its head.

That’s because new state regulations — which were supposed to go into effect in mid-December, but were delayed until Feb. 1 — would ban all title insurance companies from paying for clients’ meals, beverages and entertainment. (A ban on tipping agents was already implemented). This sweeping crackdown by Gov. Andrew Cuomo’s administration completely changes the game for the industry. State officials argue that the industry’s practices have led to sky-high rates.

But the industry — which provides insurance guaranteeing a “clean title,” or one without liens or other parties claiming ownership — is holding out hope for a reprieve. Last month, the state Senate passed a watered-down version of the bill that would limit the ban to marketing only offered as a quid pro quo. But at press time, the Assembly had not acted on it, paving the way for the more stringent rules to take effect.

Bob Treuber, of the New York State Land Title Association, a title insurance trade group, said those rules would “lead to less competition, the loss of experienced professionals and the potential for delayed home closings.”


The amount in premiums that the state’s licensed title insurers underwrote in 2016. That’s about 10% of the $11.7 billion national pie for the year. But only $51 million of the $1.1 billion was paid out in claims — a point the state used to argue that title insurers overcharge homebuyers.


The amount one unnamed insurer spent entertaining business contacts in one year, according to state officials. Those freebies included tickets for an MSG suite and passes to the U.S. Open. That amount excluded hundreds of thousands of dollars in other gifts.


The number of licensed title agents in New York State. The Department of Financial Services, headed by Superintendent Maria Vullo, counted 31 licensed title insurance companies statewide as of Dec. 31, but many of those firms subcontract out work to licensed agents who work on a freelance basis.


The number of hours of training that title insurance agents must go through in New York every two years. The requirement, which went into effect in 2014, was part of Cuomo’s crackdown and was accompanied by a rule that agents renew their licenses every other year.


The jump in lobbying dollars the title insurance industry spent in the first half of 2017 — when the new rules were being considered — compared to the same time in 2014. In the 2017 period, the industry spent about $240,000, with First American dropping $78,000, more than any other firm.


The drop in short-term revenue that the title insurance industry estimates it will see when the state fully implements its new regulations, according to NYSLTA. The association estimates that the changes could mean pink slips for 10% to 15% of the workforce in addition to pay cuts.


The total market share of the country’s four largest title insurance firms — Fidelity National Title Insurance, First American Title Insurance, Stewart Title Guaranty and Old Republic National Title Insurance Group. At a hearing last month, First American’s Randall Scott said the regulations showed a “complete lack of clarity.”


The savings that homebuyers will see from the new regulations, according to a 2015 state estimate, which was released following a sweeping investigation of the title insurance industry.

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