Slade,

I am not sure if I understand your reasoning on this matter, but I believe you are applying the 5% payout to an individual policy's premium rather than to the aggregate total of all premiums paid. Please correct me if I have misunderstood your position.

The article in question indicates that this figure is an industrywide pay out as compared to the aggregate premiums charged. Individual claims are governed by the limits of the individual policy. If you processed a claim the payout would be determined by the face value of the policy rather than a percentage of the premium you paid.

I would agree that title insurance is a cash cow to the insurance industry. There are few claims in relation to the number of policies purchased and resulting premiums paid.

Several years ago we had a panic in Connecticut among homeowners who feared that their property might be located on land belonging to an Indian tribe seeking federal recognition of their integrity so that they could open a casino. There was a glut of home owners who sought increased coverage or first time coverage against this threat. Their fears proved to be groundless, but the insurance industry welcomed the new business with the knowledge that there was little likelyhood of the need to pay any claims.

 I remember one of my law professors addressing this issue in class a number of years ago...He postulated that while title insurance is an excellent investment, it is unlikely that the average homeowner will ever need to file a claim because properly informed clients (hopefully properly represented by legal counsel) were so careful about the acquisition of marketable title. At the time I would have agreed with him because the title search played such an important role in the acquistion of title. Few , if any, buyers would have even considered not being properly represented by legal counsel in the acquistion of one of the largest investments they would make in their lifetimes.

However, in recent years I have seen an erosion of the safeguards to marketable title....buyers trying to represent themselves at closings with little or no knowledge of the pitfalls to title acquisition...reduced dependence on the quality of the title search by the insurance industry...cutting corners to maximize profit (playing the odds)...on line title searching, etc. In years to come you may see a larger aggregate pay out than the above referenced 5%.