The Unexpected Costs of Title Insurance Reports

Jeffrey R. Puthoff, Attorney at JDC Family of Companies (Omega Title Agency & Law Offices of John D Clunk) sat down with MReport to explain how title insurance companies can mitigate production costs, improve their processes, and find cost-saving opportunities.

"Title insurance agencies face increasing scrutiny from the CFPB as well as from their own lending partners.  Cost of production will go up in meeting compliance requirements," Puthoff said. "Regardless, smart companies will not pass these costs onto their customers."

He identified two main factors behind the “cost” of title insurance:

1. The insurance premium and the associated title and escrow fees.  In many states, title insurance premiums are set by state law.
2. Additional costs related to title transfer—such as transfer taxes, recording fees, or creditor paid services—are subject to strict tolerances under TRID.  The new disclosure itself informs consumers of their right to shop around for title, so why invite cheaper competition?

Puthoff say that title companies should have already adapted to the heavily regulated environment by now.

"Title companies should have upgraded their software and reworked their internal processes to better fit with the CFPB’s new timelines, "he stated. "Empower your staff and hire smart, dedicated professionals to handle your business.  Bring title examinations and closings in-house wherever possible to save costs on third-party contractors.  Bottom line: cost-saving in this new regulatory environment is about being smart, not cutting corners."

It seems title insurance companies are underestimating their reporting costs by a big margin, according to the “Title Insurance Benchmark Study” released by RedVision and Accenture this morning.

The study revealed a 30-percent variance between what participants thought was their cost per title report versus their fully burdened costs once a report was finalized.

According to Linda Naylor, Associate Director of Accenture, many title insurance companies do not know their company’s true costs in producing title reports. This, combined with constant regulatory changes, increasing compliance requirements, and unpredictable market conditions make both spotting and understanding cost inefficiencies a vital part of success in this sector.

“This is business critical for title insurance production companies,” Naylor said, referring to the study. “The title fulfillment process still relies heavily on disparate systems with several human touch points and multiple quality checks. The number one challenge for firms is to relieve themselves from low-value activities–which accounts for 67 percent of activities–during the production process.”

In addition to revealing a wide gap between expected and actual reporting costs, the study also found that handoffs are high when it comes to producing titles on refinance and purchase products. In fact, these transactions average 8.5 handoffs each. The study also found that high levels of reworking and manual work—80 to 90 percent in most cases—are causing excessive delays in the title production process.

Though somewhat shocking, Brian Twibell, CEO of RedVision, hopes these findings will help title companies operate more efficiently and effectively in the face of a changing industry.

“RedVision commissioned Accenture to conduct this study because we suspected there were inefficiencies in the title production chain; we just did not realize to what extent,” Twibwell said. “The study findings are clear: a lot of inefficiency exists—hence lost profitability—in the end-to- end title production process. However, the opportunity presents itself for firms to identify low-value activities and shift their focus to strategic growth and high value activities through technology, straight-through processing and strategic partnerships.”