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Letter to the editor

Fla. title insurers drawing scrutiny

State regulators say rates are too high, and they want answers.

By Tom Zucco, Times Staff Writer
Published August 23, 2007

This could make the ongoing war between State Farm and Florida insurance regulators look like a mild spat.

Regulators have sent subpoenas to representatives of nine title insurance companies operating in Florida, directing them to appear in Tallahassee today "to discuss matters involving the sales and business practices of title insurance in Florida."

Florida regulators said a thorough review of title rates determined that they're too high. And the lack of competition in the industry "could rise to the antitrust level," said Steve Parton, general counsel for the state's Office of Insurance Regulation.

The hearing stems from reviews by the OIR and the General Accounting Office that concluded:

- Florida homeowners are paying premiums as much as 136 percent higher than consumers in neighboring states are for comparable title insurance.

- The average bill, $2,048, amounts to 14 percent of closing costs.

- Industry profits rose by 368 percent from 1995 to 2004.

- In 2004, only about 3 cents of every premium dollar was paid out to cover losses. By comparison, property insurance companies paid out 87 cents on each dollar.

And there was this: Only five companies write more than 90 percent of the title insurance in Florida, virtually eliminating competition.

Title insurance is typically required in real estate sales to give buyers protection in case acquired property does not have clear prior ownership.

Lee Huszagh, secretary-treasurer of the Florida Land Title Association, a title insurance trade group that represents eight of the nine companies, called the studies "an ax job by incompetents." Huszagh said the examples used in one study represented only a handful of the total cases and were all gleaned from complaints.

"Hardly a representative sample," Huszagh said.

Huszagh also characterized the subpoenas as "more of a publicity stunt than a regulatory action."

"Florida's rates are comparable to states like New York, California and Texas," Huszagh said. "We are more expensive than Alabama, Georgia and the Carolinas because the cost of doing business here is higher."

As for five companies' writing most of the business, Huszagh noted that Florida has about 9,000 independent title agents.

"We will vigorously defend ourselves," he said.

But OIR officials promise they will be just as vigorous in their effort to find out what title insurers are doing and why.

Opponents of the current system argue that title insurance companies research a deed first and offer the policy only after they determine the title is clean. And since the policy covers only past problems and not future ones, the company has little risk.

"We have discovered over the last few years that the title insurance industry has not necessarily been good actors," said Parton, the general counsel for the OIR. "California, Washington and Florida have taken disciplinary action for their misuse of premium dollars."

State law requires that regulators review title insurance rates every three years. Although rates were temporarily frozen by the Florida Legislature in 2000, no complete review has been done since then.

"Shows how much cooperation we get from the title insurance industry," Parton said. "Every attempt at requesting information has been met by opposition, lack of cooperation and lawsuits."

Parton said regulators intend to take a look at the industry as a whole and ask whether the state is regulating title insurance appropriately.

"We want to educate ourselves, the Legislature and the Cabinet as to the nature and status of title insurance today and ask whether we should do something about it," he said.

"It will result in hard questions. We intend to get the answers we need."

Tom Zucco can be reached at zucco@sptimes.com">href="mailto:zucco@sptimes.com">zucco@sptimes.com or (727) 893-8247.

Fast Facts:

What is title insurance?

Usually required to close a real estate deal, title insurance is protection against unpaid taxes, liens or other problems with the title to a property. It is designed to provide assurance that ownership can be transferred without encumbrances. Mortgage lenders require it for an amount equal to the loan, but the buyer pays the premium, usually up front.

Those subpoenaed:

. FAST FACTS

Want to watch?

The Florida Channel will broadcast the hearing, set for 9:30 a.m. to 2 p.m. today, live over the Internet. To view the Web cast, go to: www.wfsu.org/tfc/ and select Florida Channel 3. Several days after the hearing, OIR will post the video on its Web site at www.floir.com.

[Last modified August 22, 2007, 23:17:26]