October 2012

Wisconsin's Reason for Increasing Title Insurance Rates

Historical Background

When I started in the title business in 1978, all title insurers and agencies followed rate charts to calculate the premiums charged to the customers. In 1989, title insurers filed "new" rates with a minimum of $150 plus $5 per thousand thereafter. According to www.census.gov, the average sales price of a home in 1989 was $79,000. The title insurance premium for that home was $470. In 2012, the title insurance premium for a $79,000 is $567, which is a 20% increase over 23 years. According to the WRA's website, today's average selling price is $134,750 which is a 70% increase over the 1989 sales price. The title premium in 1989 for $134,750 was $715. The 2012 title premium for $134,750 is only $700, which is a 2% decrease. Shall we cite gas prices which are approximately 345% higher than 1989? If we paid only 20% more for gas than we did in 1989, we would fill up at $1.16 per gallon. If only...

In 1992, the Office of the Commissioner of Insurance ("OCI") ruled that title insurers and agencies could deviate downward (lower rates). Although title rates were not considered high by any means, that ruling created very low rates in competitive markets, while less competitive markets continued to charge the standard filed rates. Just like mainstream America, pricing became the foremost concern. I can recall on more than one occasion losing orders over a mere $5 difference, even though our company has always provided a high-quality product and top-notch service. By the late-nineties, title agencies were popping up everywhere, the real estate market was at an all-time high, and competition forced title pricing even lower.

Today

As stated on its websitehttp://oci.wi.gov/agentlic.htm, the OCI strives "to maintain the integrity of the insurance industry by the creation, implementation and enforcement of laws relating to the examination and licensing of individuals and business entities conducting insurance business in the State of Wisconsin." On April 30, 2012, the OCI issued a Bulletin to all title insurance underwriters. The primary purpose of the Bulletin was to advise that downward deviations were allowed only under particular circumstances and competitive pressures were not acceptable factors. Downward deviations could be offered only when an Insurer's Rate Filing addressed a specific discount program, such as Reissue Rate, Refinance Rate, Master Policy and Take-Off Rates, etc., and a record of the deviation must be retained for five years. Failure to comply with the OCI's rules could result in fines to title insurers. In response, the industry's four national insurers filed new rates which set new minimums, reduced the dollar per thousand over the minimum and eliminated downward deviations.

How does this benefit consumers and real estate professionals?

Not only did title insurance premiums vary all over the state, but also the quality of the product varied as well, which also concerned the OCI. The elimination of downward deviations by title insurers provides consumers with the certainty that they are paying a reasonable title insurance premium. It also benefits you as a real estate professional because there is no need to call every title agent in the county to get your clients the lowest title premium-all title agencies and insurers have basically the same premiums. The minimum for an owner's policy is now $375, and the dollar per thousand ($3) is less than it was in 1989 for policies up to $100,000. The higher the policy liability, the lower the rate (see the new owner's policy rates below). The consumer wins and title agencies and insurers will now compete on quality and service.

Insurance Amount	Rate
Up to $15,000	$375
$16,000 up to $100,000	Add $3 per thousand
$101,000 up to $500,000	Add $2 per thousand
$501,000 up to $1,000,000	Add $1 per thousand
$1,001,000 up to $5,000,000	Add $.75 per thousand
$5,001,000 up to $10,000,000	Add $.65 per thousand
$10,001,000 up to $50,000,000	Add $.55 per thousand
Over $50,000,000	Add $.50 per thousand

The Importance of a Full Title Search

Title practices have changed over the years, in many good ways, and unfortunately in some not so good ways. A "catch-all exception" began appearing in Owner's Policies for the first time regarding easements, restrictions, etc. shown in the public records. This exception indicates that the title company did not conduct a full search and owners are not made aware of any easements or protective covenants which affect their new property. To their detriment, many owners did not learn about this "shortcut" until it was too late. As real estate professionals, Realtors® and real estate attorneys are privy to this practice. Protect yourself and your clients by making sure that the "catch-all exception" does not appear in title commitments on your sale/purchase transactions.

At your service

Title agencies are breathing a sigh of relief that they will no longer be forced into underbidding their competitors by $5 to capture a title insurance order. They will compete on quality and service. As a competitive person, I see both good and bad in this. With today's controlled business situations, will service really be a key factor? And what is controlled business you ask? You'll have to stay tuned for our next newsletter to find out.

For a complete listing of title rates, please call or office or view the rate schedule.

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New Title Rates Frequently Asked Questions

Why did the Title Insurance Underwriters file new rates?

The Underwriter's objective in filing new rates is to comply with the guidelines and bulletins issued by the Office of the Commissioner of Insurance.

May title companies continue to deviate from the rates?

No, the rate filing strictly prohibits downward deviations. The newly filed rates were designed to be reasonable and realistic to the Wisconsin market. The new rates are significantly less than the rates filed in February 2012 and significantly less than the rates filed in 1989. Agents may deviate upwards if proper documentation is retained in the file.

How can title companies compete if they can't lower their rates?

The new rate filings create a level playing field so the agency's outstanding customer service and support will provide the competitive edge.

If one title company is issuing the owner's policy and another one is issuing the loan policy, will I still get charged the simultaneous rate?

The Simultaneous rate is intended to be used only when the same entity issues both the owners and loan policies.

Can I quote whatever amount I feel is needed to be competitive on policies over $1M?

No. You can not deviate downward on the premium for competitive reasons. The additional premium charge for coverage amounts over $1M can be quoted as you deem appropriate based on the risk involved but cannot exceed $1.00 per thousand over $1 million of liability, nor can it be less than the filed rates.

For more information, call Assurance Title at 920-235-0017

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Our Pledge to You

When Assurance Title Services, Inc. opened for business August 30, 1984, I served as the General Manager and later went on to purchase the company on July 31, 1986. From the start, I wanted to provide the professionalism and quality seen in other title companies, but also provide additional services they didn't offer. And so it began, Assurance Title's pledge to all customers-"safety, certainty and confidence."

A few words from the owner: I realize the key to success in any business is repeat business. Therefore, I treat my customers the way I would want to be treated, efficiently, accurately, with competitive pricing and of course - a smile.

Sincerely,

Barb Schlieve
Owner, Assurance Title