This story taken from Sacbee / Business
By Gilbert Chan - Bee Staff Writer
Tuesday, October 9, 2007
Published 12:00 am PDT
California consumers for the first time can log onto their computers and do one-stop comparison shopping for title insurance.
Responding to calls to lower rates, the title industry and Insurance Commissioner Steve Poizner today will unveil the landmark online tool allowing consumers to compare premiums and title insurers in their communities. It also explains the ABCs of the product.
The rollout of the online tool -- touted as the first of its kind in the country -- comes as the title insurers scramble to repair an image tarnished by scandals and government probes and fines. Consumer groups have complained about high prices.
"There are serious problems in the title industry. It has a long history of illegal rebating going on between the title companies and Realtors and mortgage brokers," Poizner told The Bee. "The consumer often doesn't get a great deal when buying title insurance."
In the past five years, the Department of Insurance has levied more than $48 million in fines and penalties on title insurers.
For months, Poizner has pressed title insurers to enact voluntary reforms to boost competition in the industry. This summer, he announced plans aimed at rolling back title insurance rates to consumers after Jan. 1, 2009.
Poizner said the California Land Title Association's online TitleWizard "puts the power in the hands of the consumer. The title industry hasn't had the motivation to create new products and new tools for consumers. You can expect this to spread across the country."
Traditionally, consumers such as recent home buyer Kelly Lawson of Sacramento turn to title companies recommended by their real estate agent or home builder. Most have little clue that title insurance is designed to protect homeowners against unforeseen challenges to the ownership of the property.
"It was very overwhelming. I relied on the Realtor," said Lawson, who wrapped up the purchase of a three-bedroom North Highlands home last month. The title insurance was folded into the overall costs to close the deal. "I don't know half the stuff I signed."
Indeed, a report from the U.S. Government Accountability Office raised questions in April about industry competition, pointing out that five insurers accounted for 92 percent of the national market in 2005. It recommended that state insurance regulators strengthen industry oversight and improve the ability of consumers to comparison-shop.
"It's a step in the right direction. Title insurance is overpriced," said mortgage expert Jack Guttentag, a retired finance professor at the University of Pennsylvania's Wharton School. "The big title insurers are running a little scared these days. They've gotten some terrible publicity in recent years."
Margaret Foster, president of the California Land Title Association -- a nonprofit industry group -- said the site will help consumers learn about title insurance and see "how competitive the industry is in California."
"We felt it was an opportunity to partner with the commissioner and provide a high-tech way in which consumers could gain access to our products and services and pricing," Foster said.
Using the TitleWizard at www.clta.org, consumers who are buying, selling or refinancing a home can get pricing information from the title insurers in their area. Nearly 100 companies, including the largest in the state, are part of the database.
In the Sacramento area, for example, the site lists 10 insurers offering policies. On a single-family home purchased for $400,000, the insurers are offering policies priced from $445 to $522.
While the savings may appear small in a deal involving thousands of dollars in closing costs and fees, consumer advocates said the transparency could bring down rates further in the future.
"Eighty dollars may not seem like a lot. That's money consumers can use for other things," said Norma Garcia, an attorney for Consumers Union in San Francisco.
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