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The title insurance industry over the past few years has gone from a service industry to a marketing industry. The competition has become so fierce while technology has reduced the cost of title searchs. So instead of having to conduct expensive title searches as they did in the past, now the industry has to spend inordinate time and money courting real estate agents for references.

But they have run into a snag in the state of Washington. Title Insurance companies can only spend 25 per year on getting references per middleman and they have been spending much, much more than that. And now the state insurance commissioner, Mike Kreidler,  is looking into the situation.

“It may be that we’re talking about buggy-whip manufacturers in the automobile age,” he said. “We’re going to look at what’s in the best interest of consumers and the economy as opposed to the best interest of the title-insurance industry.”
Kreidler is convening a panel to look at whether customers are being well-served by an industry that he said seems to spend more effort wooing middlemen with pricey dinners and golf outings than competing in the marketplace.
Title policies are part of virtually every real-estate sale, purchase or refinance, and they cost anywhere from $400 to more than $1,000 per policy in Washington state. They protect lenders, buyers and sellers against losses arising from problems such as conflicting ownership or unpaid liens that existed before the property transferred hands.
Kreidler said the need for change became apparent to him during an investigation of marketing practices by 11 companies selling policies in King, Snohomish, Pierce and Clark counties. In a report issued Monday, Kreidler’s office said some title companies have openly flouted a state law that restricts the amount a title company can spend to influence people — builders, real-estate and escrow agents and others — to send them business. The limit is $25 per year for each middleman.
The 10-month-investigation found “ample evidence that some of the major offenders view the law as little more than a nuisance.” Some of the firms were so brazen that they continued to break the law even after they knew their practices were being investigated by the commissioner’s office, the report said.
Real-estate agents, escrow brokers, lenders, builders and others in a position to steer clients routinely benefited from advertising paid by the industry, and were treated to free meals and drinks, and to football games and golf outings, all in violation of the law, the report said. via The Seattle Times

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