Saturday, July 27, 2013

title insurance "commission" - Is it a gravy train?

I am always disturbed when I read an article discussing title insurance premiums that make it sound like the premium paid by a consumer is mostly commission. While that statement is true, the articles make the commission sound like a ripoff or a big vat of extra gravy that we don't deserve.

We operate in Pennsylvania which is a filed rate state. We write our title insurance under the TIRBOP structure which means the premium charge to a consumer is an "all-inclusive" rate.

This all-inclusive premium includes:

an expert title examination [one 60 year chain]
owner policy
loan policy, if applicable
preparation of HUD-1 Settlement Statement & disbursement of funds
preparation of legal description, affidavits & processing correspondence
settlement/closing services

A portion of the premium is sent to the title insurance company for the insurance coverage.  The remainder is retained by the title insurance agency to cover the cost of performing these services, creating the policies, and operating the agency.  It's not gravy. It's the meat and potatoes. This is HOW we get paid. In fact, premium commissions for small transactions don't cover the cost processing of the transaction, however they are offset by the larger transactions that add a bit more to the general operating pot.

In Pennsylvania we are permitted to charge for extra services which are considered optional.  These extras are what consumers should focus on when they are performing a price check between providers.  Many title agencies charge extra for signing services/notary because they do not have their own closing staff.  Also, many charge for after hours or out of office closings.  In our office, we only use staff closers and we perform closings off site and after hours without an extra charge.

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