If you're new here, you may want to subscribe to my RSS feed. Thanks for visiting!

When you purchase a home, a buyer typically gets title insurance. Title Insurance is there to protect the buyer from having a prior owner of the property coming out of the woodwork and claiming that they never sold the property. It makes sense and protects  the buyer and the whole industry. No one ever lose their home because of a bad title.

But the industry essentially markets hard to realtors, and spends a large portion of the premium dollars on marketing as opposed to paying premiums.

The profits involved appear significant. Nationwide, only a tiny percentage of premiums are returned to consumers to settle claims.

In 2003, according to ALTA, the industry paid out about $662 million. That’s just over 4 percent of the $15.7 billion taken in as premiums. Auto insurers, in contrast, paid out 75 percent of collected premiums, according to the American Insurance Association (AIA).

But that’s the wrong way to think about title insurance, according to Lipshutz.

“Title insurance is loss prevention insurance,” he said. “Like boiler insurance (where much of the premium dollar is spent on inspections and risk analysis), most of the premium money is spent to prevent later losses. Life and auto insurance are intended to pay off later losses.” via CNN

This is another part of the real estate market that has gotten fat and happy. A smart player could leverage the low cost marketing of the internet and provide title insurance at a much lower rate to the public, and still make a great income.

Related posts:

1. Title Insurance Fraud Put Under the Microscope
2. NY Attorney General Settles With 2 Title Insurance Companies Over Kickbacks
3. Title Insurance Kickbacks Elliot Spitzers Next Target
4. Title Insurer’s Practices Investigated in Washington State
5. Will Global Warming Scare Fatten Insurance Companies Pocketbooks Even More?