A California title insurance organization lashed out Thursday at a report on competition in the state issued by California Insurance Commissioner John Garamendi, calling the report “bogus.”
The California report, “An Analysis of Competition in the California Title Insurance and Escrow Industry,” released by the commissioner’s office, concludes that three insurers control 75 percent of the state’s insurance market.
“The bogus report issued by (California Insurance Commissioner) John Garamendi … is not worth the paper it is written on,” charged Lawrence Green, executive vice president and counsel for the California Land Title Association, in a statement last week.
In response, Garamendi said, “This is the fifth report on this industry since 1977, and they all come to the same conclusion: the title industry does not compete on price.”
The commissioner said Thursday that he is taking steps to make title insurers cut the rates paid by California homeowners based on the 111-page report.
Based on the report, Garamendi expects “in the coming months to issue orders directing rates to be lowered to the levels at which they would be were this a competitive market.” The commissioner also plans to hold hearings to examine title insurance premiums.
In response, Green issued a statement, saying title insurers were asked to produce information for the study by Dec. 8 while the results were announced mere weeks later.
“Clearly, Garamendi and his hired-gun consultant pre-produced their ‘study’ in order to achieve a desired conclusion – irrespective of actual data received from title companies,” Green said.
“We received almost all of the information long before Dec. 8,” Garamendi responded. “The information that we gathered during the course of the inquiry, including up to the final date of Dec. 8, is very clear that this industry does not compete on price.”
The commissioner cited five previous studies as reaching similar conclusions: a 1977 Department of Justice Report; a 1979 American Land Title Association Report on Controlled Businesses; a 1980 Peat Marwick Study for the Department of Housing and Urban Development; the 1980 California Department of Insurance Bulletin 80-12; and a 1986 Texas Department of Insurance Study.
According to information about U.S. market share posted on the American Land Title Association’s Web site, in the second quarter of 2005, the Fidelity family of companies had a 29.3 percent market share, the First American family had a 27.4 percent market share and the LandAmerica family had a 17.8 percent market share in the United States.
In his statement, Green cited a comparison on Bankrate.com released in November in which he said California rates are described as “below the national average and significantly lower than comparable title insurance rates in other large states.”
The Bankrate.com comparison says that the national average for title insurance fees is $756, and that the California average is $749. According to Bankrate.com, the New York average fee is $1,451.
“The Bankrate numbers don’t speak to the issue of concentration or the issue of extraordinarily high profits, nor do they speak to the issue of whether those consumers were overcharged or not,” said Garamendi. “It speaks to the national average. Maybe the national average is an overcharge.”
Garamendi said his office would give the title insurance industry a chance to comment on the issue in a public workshop on the report that will take place in early January.
“The title industry can bring to the public hearing in early January whatever information they want to present that is different from what is already available,” Garamendi said.
“This industry does not compete on price. The market competition in this industry uses illegal rebating and kickbacks to obtain market share,” Garamendi alleged.
The title insurance industry has been under an intense spotlight this year. Insurance regulators in Colorado in February launched an investigation of nine Colorado title insurers for alleged kickback schemes said to result in overcharges to consumers. The probe sparked dozens of similar investigations nationwide, including probes in Florida, Washington, Hawaii, California, Oklahoma, Minnesota and Washington.
Nine major California title insurers owned by Fidelity, First American and LandAmerica in July agreed to pay $37.8 million in refunds and penalties for alleged illegal rebating in a settlement with the commissioner. The companies admitted no wrongdoing.
In September, in a settlement agreement, Fidelity National Financial agreed to refund about $1.2 million to consumers in approximately 18 states, without admitting wrongdoing.
Also in September, LandAmerica Financial Group agreed to contribute $1 million to the Arizona chapters of the American Red Cross to settle a probe into the company’s practices by the state insurance department, without admitting wrongdoing.
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