Title Insurance

Allow competition in title insurance

The Issue

Texas title insurance rates are too expensive and lack competition.

Texans pay almost $2 billion dollars in title insurance premiums per year, and we have among the highest rates of any state in the country. Worse yet, state law actually forbids price competition, sets a single rate mandated for all transactions, and prohibits consumers from negotiating or shopping for lower rates.

According to research from the University of Texas at Austin LBJ School of Public Affairs, Texans pay up to $1,663 more for title insurance than in other states for property up to $1 million, and the higher the property value, the greater the overcharge.

The reason we overpay is simple. In Texas, there’s no competition. Texas, which is the free market leader in most industries, actually sets a single base rate that dictates all consumers, residential and commercial alike, must pay the same rate of premium with no opportunity for competition. Even if a policyholder desired to negotiate or shop around for the best price, Texas law allows no differentiation. It is actually illegal for a title company to offer a reduced rate or discount.

The current regulatory system not only adds significant costs for homeowners but also for businesses engaging in real estate transactions. While high residential rates discourage homeownership in Texas, high commercial rates burden businesses and can negatively impact their relocation and expansion.

The current system is far removed from the Texas Model of low taxes and regulations, which has made Texas the nation’s economic leader for the last 15 years. Texas can easily introduce competition and choice into title insurance by applying the same file-and-use system that is used for auto and home insurance. Making title insurance consistent with the Texas Model will lead to lower rates, higher quality coverage, and more consumer choice. Additionally, it will lower the cost of business in Texas which can lead to more jobs and a stronger economy.

Recommendations

  • Enact legislation allowing free-market competition on title insurance rates in the state of Texas.
  • Increase competition and consumer choice in the title insurance market by adopting the same file-and-use system that is used for auto and home insurance for both rates and forms.
  • Eliminate the authority of the TDI to promulgate or approve the split of premiums between title insurance companies and agents.

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