United States Government Accountability Office

GAO Report to the Ranking Member, 

Committee on Financial Services, 

House of Representatives 

TITLE INSURANCE

Actions Needed to 

Improve Oversight of 

the Title Industry and 

Better Protect 

Consumers 

April 2007 

 

GAO-07-401 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

April 2007

TITLE INSURANCE

Actions Needed to Improve Oversight of 

the Title Industry and Better Protect 

Consumers 

Highlights of GAO-07-401, a report to the 

Ranking Member, Committee on Financial 

Services, House of Representatives 

In a previous report and testimony, 

GAO identified issues related to 

title insurance markets, including 

questions about the extent to

which premium rates reflect 

underlying costs, oversight of title

agent practices, and the 

implications of recent state and

federal investigations. This report 

addresses those issues by

examining (1) the characteristics of

title insurance markets across 

states, (2) factors influencing

competition and prices within 

those markets, and (3) the current 

regulatory environment and 

planned regulatory changes. To 

conduct this review, GAO analyzed

available industry data and studies, 

and interviewed industry and 

regulatory officials in a sample of

six states selected on the basis of 

differences in size, industry

practices, regulatory environments, 

and number of investigations. 

What GAO Recommends

GAO recommends that HUD and

state insurance regulators take

actions to improve consumers’ 

ability to comparison shop for title 

insurance and strengthen the

regulation and oversight of the title

insurance market, including the 

collection of data on title agents’ 

operations. Further, Congress may 

want to consider, as part of its 

oversight of HUD, exploring the 

need for modifications to RESPA, 

including increasing HUD’s

enforcement authority. HUD 

generally agreed with these 

recommendations, and NAIC

agreed they should be explored. 

The U.S. title insurance market is highly concentrated at the insurer level, 

but market characteristics varied across states. In 2005, for example, five

insurers accounted for 92 percent of the national market, with most states 

dominated by two or three large insurers. Variations across states included 

the way title agents conducted their searches as well as the number of 

affiliated business arrangements (ABA) in which real estate agents, brokers, 

and others have a stake in a title agency. Finally, premiums varied across 

states due to cost and market variations that can also make understanding 

and overseeing title insurance markets a challenge on the national level. 

Certain factors raise questions about the extent of competition and the 

reasonableness of prices that consumers pay for title insurance. Consumers 

find it difficult to comparison shop for title insurance because it is an 

unfamiliar and small part of a larger transaction that most consumers do not 

want to disrupt or delay for comparatively small potential savings. In 

addition, because consumers generally do not pick their title agent or 

insurer, title agents do not market to them but to the real estate and 

mortgage professionals who generally make the decision. This can create 

conflicts of interest if those making the referrals have a financial interest in 

the agent. These and other factors put consumers in a potentially vulnerable

situation where, to a great extent, they have little or no influence over the 

price of title insurance but have little choice but to purchase it. 

Furthermore, recent investigations by the Department of Housing and Urban 

Development (HUD) and state insurance regulators have identified instances 

of alleged illegal activities within the title industry that appeared to take 

advantage of consumers’ vulnerability by compensating realtors, builders, 

and others for consumer referrals. Combined, these factors raise questions 

about whether consumers are overpaying for title insurance. 

Given consumers’ weak position in the title insurance market, regulatory 

efforts to ensure reasonable prices and deter illegal marketing activities are 

critical. However, state regulators have not collected the type of data, 

primarily on title agents’ costs and operations, needed to analyze premium 

prices and underlying costs. In addition, the efforts of HUD and state 

insurance regulators to identify inappropriate marketing and sales activities

under the Real Estate Settlement Procedures Act (RESPA), have faced 

obstacles, including constrained resources, HUD’s lack of statutory civil 

money penalty authority, some state regulators’ minimal oversight of title 

agents, and the increasing number of complicated ABAs. Finally, given the 

variety of professionals involved in a real estate transaction, a lack of 

coordination among different regulators within states, and between HUD 

and the states, could potentially hinder enforcement efforts against 

compensation for consumer referrals. Because of the involvement of both 

federal and state regulators, including multiple regulators at the state level,

effective regulatory improvements will be a challenge and will require a

coordinated effort among all involved.

www.gao.gov/cgi-bin/getrpt?GAO-07-401.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Orice M. 

Williams at (202) 512-8678 or 

williamso@gao.gov.
Contents 

Letter 1

Results in Brief 3

Background 7

Title Insurance Market Is Highly Concentrated at the Insurer Level, 

but Otherwise Differs across States 11 

Multiple Factors Raise Questions about the Extent of Competition 

and the Reasonableness of Prices in the Title Insurance Industry 21 

Limited State and Federal Oversight of the Title Insurance Industry 

Has Resulted in Proposals for Change 41 

Conclusions 53

Matters for Congressional Consideration 55 

Recommendations for Executive Action 55 

Agency Comments and Our Evaluation 56 

Appendix I Objectives, Scope, and Methodology 59 

Appendix II Potential Approach to Better Understand Title Agents’ 

Costs and How These Costs Relate to Insurance 

Premiums 62 

Appendix III Comments from the Department of Housing and Urban 

Development 64 

Appendix IV Comments from the National Association of Insurance 

Commissioners 67 

Appendix V GAO Contact and Staff Acknowledgments 68 

Tables 

Table 1: Information on Closed Cases and Settlements Involving 

Referral Fees Resulting from Investigations by Insurance 

Regulators in Six Sample States and HUD, 2003-2006 28 

Page i GAO-07-401 Title Insurance
Table 2: Regulation of Title Insurance Agents in Six Sample States 44 

Figures 

Figure 1: Title Insurer National Market Share as a Percentage of 

Direct Premiums Written, 2005 12 

Figure 2: Title Insurance Premiums Written, by Source, 2005 14 

Figure 3: Example of an Affiliated Business Arrangement 15 

Figure 4: Common Elements of the Title Search and Examination 

Process 16

Figure 5: Title Insurance Premium Rates for a Basic Owner’s Policy 

on Median-Priced Homes in Selected Areas, 2005 19 

Figure 6: Average Allocation of Closing Costs in California, 2005 24 

Figure 7: Example of an Alleged Captive Reinsurance Arrangement 31 

Figure 8: Combined Return on Equity for the Five Largest Title 

Insurers, and the Property-Casualty Insurance Industry as 

a Whole, 1992-2005 36 

Figure 9: Percentage Change in Premium Rates and Premiums Paid 

on Median-Priced Homes in Selected Areas in Five Sample 

States, 2000-2005 37 

Figure 10: Typical Premium Splits between Insurers and Agents in 

Six Sample States 39 

Figure 11: Title Industry Costs as a Percentage of Premiums 

Written, 2005 42 

Page ii GAO-07-401 Title Insurance
Abbreviations 

ABA affiliated business arrangement 

ALTA American Land Title Association 

Fannie Mae Federal National Mortgage Association 

Freddie Mac Federal Home Loan and Mortgage Corporation 

HUD Department of Housing and Urban Development 

NAIC National Association of Insurance Commissioners 

RESPA Real Estate Settlement Procedures Act 

RESPRO Real Estate Services Providers Council 

SEC Securities and Exchange Commission 

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reproduce this material separately. 

Page iii GAO-07-401 Title Insurance
United States Government Accountability Office

Washington, DC 20548 

April 13, 2007

The Honorable Spencer Bachus 

Ranking Member 

Committee on Financial Services 

House of Representatives 

Dear Mr. Bachus: 

Title insurance is designed to guarantee clear ownership of a property that 

is being sold and is a required part of most real estate transactions across 

the United States. Although home buyers pay for title insurance premiums, 

they often know little about the insurers themselves or the title insurance 

industry. Recent state and federal investigations into the sale of title 

insurance have identified practices by some title insurers, their agents, and 

others involved in the sale of title insurance, that allegedly allowed these 

entities to make undue profits at consumers’ expense. At the same time, 

insurance regulators in at least four states have concluded that consumers 

are being overcharged for title insurance, and the California insurance 

regulator has recommended rate rollbacks—an action that some in the 

title industry have strongly criticized. Because virtually everyone who 

buys a home or refinances a home mortgage in the United States typically

must purchase title insurance, the potential effects of such practices are

enormous. 

We previously provided a report and testimony identifying issues in the 

title insurance market that merited further study because they could shed

light on competition and the prices consumers pay.1

 In response to the 

former Chairman’s request, we prepared this report to address and 

elaborate on those issues. Specifically, we address (1) the characteristics 

of title insurance markets and differences across states, (2) prices and 

competition in the industry, and (3) the current regulatory environment 

and planned regulatory changes. 

 1

GAO, Title Insurance: Preliminary Views and Issues for Further Study, GAO-06-568 

(Washington, D.C.: Apr. 24, 2006); and Title Insurance: Preliminary Views and Issues for

Further Study, GAO-06-569T (Washington, D.C.: Apr. 26, 2006).

Page 1 GAO-07-401 Title Insurance
To do this work, we performed a detailed review of the laws, regulations, 

and market practices in California, Colorado, Illinois, Iowa, New York, and 

Texas.2

 We chose these six states on the basis of differences in the size of 

their markets, title insurance practices and customs, the rate-setting and 

regulatory environments, and the number of federal and state investigative 

actions. In some of these states, we were able to tour title plant facilities 

and observe the title search and examination process. We reviewed 

available studies of the title insurance industry and discussed their results 

with the authors.3

 We also gathered the views of officials from a variety of 

national organizations whose members are involved in the marketing or 

sale of title insurance or related activities, and we spoke with insurers, 

agents, and title industry associations. We asked for, but did not receive, 

cost data from agents and insurers that would allow us to analyze agents’ 

costs. We obtained and analyzed data collected by the National 

Association of Insurance Commissioners (NAIC), the Texas Department of 

Insurance, the California Department of Insurance, and the American Land 

Title Association (ALTA).4

 We also consulted other publicly available 

financial information on title insurers and agents and spoke with agents 

about costs, examined financial data filed with the Securities and 

Exchange Commission (SEC), and spoke with officials from three of the 

largest title insurance underwriters. We interviewed key insurance, 

banking, mortgage, and real estate regulators in each state about the 

regulatory environments, spoke to officials from the Department of 

Housing and Urban Development (HUD), and reviewed relevant federal 

laws and regulations. We also discussed these issues with officials from 

the Federal National Mortgage Association and the Federal Home Loan 

and Mortgage Corporation to better understand the relationship between 

the secondary mortgage market and title insurance. Lastly, we interviewed

 2

Except where noted, our analysis is limited to these states. 

3

Birny Birnbaum, Report to the California Insurance Commissioner: An Analysis of 

Competition in the California Title Insurance and Escrow Industry (Austin, TX:

December 2005); Donald Martin, PhD, and Richard Ludwick, Jr., PhD, Affiliated Business 

Arrangements and Their Effects on Residential Real Estate Settlement Costs: An

Economic Analysis (Washington, D.C.: October 2006); and Gregory Vistnes, An Economic 

Analysis of Competition in the Title Insurance Industry (Washington, D.C.: March 2006). 

4

NAIC is a voluntary organization of the chief insurance regulatory officials of the 50 states, 

the District of Columbia, and the four U.S. territories. NAIC assists state insurance

regulators by providing guidance, model (or recommended) laws and guidelines, and 

information-sharing tools. ALTA is a national trade association for title insurers and agents, 

but its members may also include attorneys, builders, developers, lenders, and real estate 

brokers. 

Page 2 GAO-07-401 Title Insurance
staff and state regulators working with NAIC to get their views on the 

industry and to obtain information on the activities of their Title Insurance 

Working Group. 

We performed our work in Washington, D.C.; Chicago, Illinois; and six 

sample states between February 2006 and March 2007 in accordance with 

generally accepted government auditing standards. Appendix I contains a 

more detailed description of our objectives, scope, and methodology. 

In the United States, the title insurance market is highly concentrated at 

the insurer (or underwriter) level, but market characteristics varied across 

the states. In 2005, for example, five insurers accounted for 92 percent of 

the national market, and most states were dominated by two or three large 

insurers. However, state markets differed in several ways. For example, 

large insurers tended to use local or regional title agents to conduct their 

business, and the mix of affiliated agents (those in which the insurer has 

an ownership interest) and independent agents varied across states. The 

extent of affiliated business arrangements (ABA)—situations in which real 

estate or other professionals are part or full owners of title agencies—also 

varied. In some states the number of ABAs, which have been cited in many

of the regulatory investigations into industry practices, has grown 

substantially. Furthermore, title agents use different processes to carry out 

title searches and examinations, largely because of variations in the way 

the industry has developed across states. Title agents in some states have 

automated “title plants” containing most public records, while, in other 

states, title agents rely on the less-efficient process of hiring people to 

search physical records. The extent of agents’ activities also varied widely

across states, including how they set prices for their services, the portion

of claims they paid, and the extent of their participation in the escrow and 

closing processes. Finally, we found that premiums varied across states, 

due to cost and market variations that can make understanding and 

overseeing title insurance markets a challenge on the national level. 

Results in Brief 

Several factors related to the way that title insurance is marketed and

priced raise questions about the extent of price competition in the title 

insurance industry and the ability of consumers to affect market prices. 

First, consumers find it difficult to shop for title insurance based on price. 

Purchasing title insurance is a transaction that consumers are unfamiliar 

with, and it can be difficult for them to gather information on all title 

insurance-related costs. HUD provides educational information on title 

insurance. However, the benefit of this information is limited because 

consumers may receive it after a title agent and insurer have been 

Page 3 GAO-07-401 Title Insurance
selected, and lenders are not required to provide it on mortgage refinance

transactions. In addition, purchasing title insurance is generally a small 

part of a larger home purchase or mortgage refinancing process that most 

consumers do not want to disrupt or delay for relatively small potential 

savings. Second, consumers generally do not select their title agent or 

insurer, and title agents do not market to consumers but rather compete

among themselves for referrals from those who do—that is, real estate and 

mortgage professionals. This arrangement can create conflicts of interest 

if professionals making the referrals have a financial interest in the agent 

recommended. HUD and state insurance regulators have recently 

identified instances of alleged illegal activities within the title industry that 

appeared to compensate real estate agents, builders, and others for 

referring consumers to particular title insurers or agents. These alleged 

activities, which include referral fees, captive reinsurance arrangements, 

and inappropriate ABAs, potentially reduce price competition and, 

according to some insurance regulators, could indicate excessive pricing

by insurers.5

 Third, as property values or loan amounts increase, prices 

that consumers paid for title insurance appeared to increase faster than 

insurers’ and agents’ costs. Insurers we spoke with argued that such a 

pricing structure reflected regulators’ intent to subsidize consumers in 

low-value transactions, but they could not provide data to support the 

existence of such subsidization. Of the six regulators we spoke with, only 

one said that such subsidization was intentional. Finally, in states where 

agents’ search and examination services are not included in the premium, 

it is not clear that the underlying costs justify the additional amounts 

consumers may pay to title agents. Insurers told us that they generally

shared the same portion of premiums with their agents, regardless of 

whether agents’ costs for search and examination services were to be 

included in the premium. Ultimately, disagreement exists between title 

industry officials and regulators over the actual extent of price 

competition within title insurance markets. Industry officials generally

assert that price competition exists, while many regulators argue (1) that it 

does not exist and (2) that consumers may be paying too much for title 

insurance compared with the cost of providing the insurance.

 5

In captive reinsurance arrangements, a home builder, real estate broker, lender, title 

insurance company, or some combination of these entities forms a reinsurance company

that works in conjunction with a title insurer. Sham ABA arrangements are those in which 

the affiliated entity performs little or no actual settlement services and is allegedly being 

used just to compensate ABA owners for consumer referrals. Other arrangements include 

the use of inducements and incentives by title companies to obtain title insurance business,

especially when these inducements were used to influence referrals by real estate agents, 

banks, lenders, builders, developers, and others. 

Page 4 GAO-07-401 Title Insurance
Data collection efforts and regulatory oversight, especially of title agents, 

were limited across the states we reviewed. Given consumers’ apparently 

limited ability to exert pressure on title agents and insurers to compete on 

price, the critical question is whether amounts paid by consumers for title 

insurance reflect the actual underlying costs of producing title insurance 

policies. Potentially understanding the relationship between costs and the 

amounts consumers pay could help regulators improve their ability to 

protect consumers. Yet, states rarely audit agents; few require strong 

insurer oversight of agents; and, until recently, state regulators had done 

little to oversee ABAs or enforce laws intended to restrict business from

affiliated sources. Also, because title insurance is a relatively small line of 

insurance, title insurers and agents get less than the usual limited market 

conduct scrutiny given other types of insurers by state insurance 

regulators.6

 All of the regulators, both state and federal, face a number of 

challenges. For example, varying levels of cooperation exist within each 

state among the regulators who oversee entities involved in the sale and 

marketing of title insurance, with some states demonstrating little or no 

cooperation and others having somewhat more structured arrangements. 

HUD—the primary federal agency responsible for enforcing the Real 

Estate Settlement Procedures Act (RESPA)—has taken a number of 

enforcement actions under RESPA recently, but HUD officials told us that 

they face resource limitations and difficulties in investigating increasingly 

complex ABA arrangements. Furthermore, HUD is authorized to seek 

injunctions against alleged violations of section 8 of RESPA’s provisions 

on referral fees and affiliated businesses, but HUD is not authorized to 

levy civil money penalties. Moreover, a lack of formal coordination 

between HUD and state regulators on referral fee cases may have hindered 

enforcement efforts. In response to these and other concerns, several state 

regulators and HUD are either planning or making changes to their 

regulatory regimes for the marketing and sale of title insurance. These

changes include potentially reducing premium rates; collecting detailed 

cost data from title agents; and seeking changes to RESPA, including 

enhancing HUD’s enforcement authority. Some industry stakeholders see 

the current model of selling and marketing title insurance as irretrievably 

broken and have put forth the following two alternatives: (1) requiring 

 6

Market conduct examinations are performed by state insurance commissioners, and they 

review agent-licensing issues, complaints, types of products sold by the company and 

agents, agent sales practices, proper rating, claims handling, and other market-related 

aspects of an insurer’s operation. See GAO, Insurance Regulation: Common Standards

and Improved Coordination Needed to Strengthen Market Regulation, GAO-03-433 

(Washington, D.C.: Sept. 30, 2003). 

Page 5 GAO-07-401 Title Insurance
lenders to pay for title insurance and (2) following the Iowa model of a 

state-run title insurer. 

We are recommending that HUD take two actions to improve the 

functioning of the title insurance market. Specifically, we are 

recommending that HUD (1) improve consumers’ ability to shop for title 

insurance based on price and (2) improve its ability to detect and deter 

violations of section 8 of RESPA. In taking these actions, we recommend 

that HUD consider expanding the information in its home-buyer 

information booklet; evaluating the costs and benefits to consumers from

ABAs; clarifying regulations related to referral fees and ABAs; and 

enhancing the agency’s coordination with state regulators. Likewise, we 

are recommending that state insurance regulators, working through NAIC 

where appropriate, take two actions to improve the functioning of the title 

insurance market. Specifically, we are recommending that state regulators

take action to (1) improve consumers’ ability to shop for title insurance 

and (2) improve their oversight of title agents. As part of this process, we 

are recommending that these regulators consider evaluating the 

competitive benefits of publicizing complete title insurance cost 

information; strengthening their regulation of title agents and ABAs, 

including the collection of data on title agents’ operations; and exploring

ways to improve their cooperation with other state regulators and HUD. 

We also suggest, as a matter for congressional consideration, amending 

RESPA to give HUD increased enforcement authority for violations of 

RESPA’s section 8 prohibitions on referral fees by granting the ability to

levy civil money penalties and enhance the information required to be 

provided to consumers. 

We provided a draft copy of this report to HUD and NAIC. The Assistant 

Secretary for Housing at HUD and the Executive Vice President of NAIC 

provided written comments on the draft. Their comments are included in 

appendixes III and IV, respectively, of this report. The Assistant Secretary 

for HUD generally agreed with the recommendations in the report, and 

also indicated that the report accurately assessed the issues that adversely 

affect consumers in the title insurance market. In response to our 

recommendation to better protect consumers and improve their ability to

shop for title insurance, he acknowledged the importance of these goals 

and noted that HUD is taking several actions in these areas. Specifically, 

he said that HUD is (1) considering ways to improve its home-buyer 

information booklet; (2) evaluating whether various ABA structures, even

though they may be legal, are operating as Congress intended; and 

(3) continuing its efforts to develop and clarify guidelines regarding 

practices that negatively effect consumers. With respect to our 

Page 6 GAO-07-401 Title Insurance
recommendation to consider improving regulatory coordination with state 

regulator agencies, the Assistant Secretary agreed that such coordination

is necessary and pointed out past instances of successful cooperation 

between HUD and state insurance regulators. Lastly, he emphasized the 

ongoing challenge of RESPA enforcement without civil money penalty 

authority, stating that consumers would benefit if such authority were 

granted to HUD. The Executive Vice President of NAIC stated that the 

recommendations in the report were worthy of exploration, and she noted 

that the report recognizes that shortcomings exist in the area of consumer 

protection. Both HUD and NAIC also offered clarifying remarks. 

In any real estate transaction, the lender providing the mortgage needs a 

guarantee that the buyer will have clear ownership of the property. Title 

insurance is designed to provide that guarantee by generally agreeing to

compensate the lender (through a lender’s policy) or the buyer (through 

an owner’s policy) up to the amount of the loan or the purchase price, 

respectively. Lenders also need title insurance if they want to sell 

mortgages on the secondary market, since they are required to provide a 

guarantee of ownership on the home used to secure the mortgage.

7

 As a 

result, lenders require borrowers to obtain title insurance for the lender as 

a condition of granting the loan (although the buyer, the seller, or some 

combination of both may actually pay for the lender’s policy). Lenders’

policies are in force for as long as the loan is outstanding, but end when 

the loan is paid off (e.g., through a refinancing transaction); however, 

owners’ policies remain in effect as long as the purchaser of the policy 

owns the property. 

Background 

Title insurance is sold primarily through title agents, although insurers 

may also sell policies themselves. Before issuing a policy, a title agent 

checks the history of a title by examining public records, such as deeds, 

mortgages, wills, divorce decrees, court judgments, and tax records. If the 

title search reveals a problem, such as a tax lien that has not been paid, the 

agent arranges to resolve the problem, decides to provide coverage despite 

the problem, or excludes it from coverage. The title policy insures the 

policyholder against any claims that might have existed at the time of the 

purchase but were not identified in the public record. The title policy does 

 7

Both the Federal National Mortgage Association and the Federal Home Loan Mortgage 

Corporation require a guarantee of title as a condition of purchasing loans from mortgage 

lenders. 

Page 7 GAO-07-401 Title Insurance
not require that title problems be fixed, but compensates policyholders if a 

covered problem arises. Except in very limited instances, title insurance 

does not generally insure against title defects that arise after the date of

sale. 

Title searches are generally carried out locally because the public records 

to be searched are usually only available locally. Title agents or their 

employees conduct the searches. The variety of sources that agents must 

check during a title search has fostered the development of privately 

owned, indexed databases called “title plants.” These plants contain copies 

of the documents obtained through searches of public records, and they

index the copies by property address and update them regularly. Insurers, 

title agents, or a combination of entities may own a title plant. In some 

cases, owners allow other insurers and agents access to their plants for a 

fee. 

Title insurance premiums are paid only once, at the time of sale or 

refinancing, to the title agent. In what is called a premium split, agents 

retain or are paid a portion of the premium amount as a fee for conducting 

the title search and related work and for their commission. Agents have a

fiduciary duty to account for premiums paid to them, and insurers 

generally have the right to audit the agents’ relevant financial records. The 

party responsible for paying for the title policies varies by state and even 

by areas within states. In many cases, the seller pays for the owner’s policy 

and the buyer pays for the lender’s policy, but the buyer may also pay for

both policies or split some or all of the costs with the seller. In most cases, 

the owner’s and lender’s policies are issued simultaneously by the same 

insurer, so that the same title search can be used for both policies. The 

price that the consumer pays for title insurance is determined by applying 

a rate set by the underwriter or state to the loan value (for the lender’s 

policy) and home price (for the owner’s policy). In a recent nationwide 

survey, the average cost for simultaneously issuing lender’s and owner’s 

policies on a $200,000 loan, plus other associated title costs, was 

approximately $859, or approximately 28 percent of the average total loan

origination and closing fees.8

 8

Bankrate.com, Closing Costs Survey, 

http://www.bankrate.com/brm/news/mortgages/ccmain2006a1.asp (North Palm Beach, FL:

August 2006). The survey was conducted by Bankrate.com in 2006 by obtaining online 

information where available. We did not assess the validity of the data collected in the 

survey. 

Page 8 GAO-07-401 Title Insurance
Title insurance differs from other types of insurance in key ways. First, in 

most property and casualty lines, losses incurred by the underwriter 

account for most of the premium. For example, property-casualty insurers’ 

losses and loss adjustment expenses accounted for approximately 73 

percent of written premiums in 2005.9

 In contrast, losses and loss 

adjustment expenses incurred by title insurers as a whole were 

approximately 5 percent of the total premiums written, while the amount 

paid to or retained by agents (primarily for work related to title searches 

and examinations and for commissions) was approximately 70 percent. 

Second, title agents’ roles and responsibilities differ from those of agents 

for other lines of insurance. Agents in lines of insurance other than title 

insurance primarily serve as salespeople, while title agents’ work can be a 

labor-intensive process of searching, examining, and clearing property 

titles as well as underwriting and traditional sales and marketing. Title 

agents access and examine numerous public documents, among them tax 

records, liens, judgments, property records, deeds, encumbrances, and 

government documents, and then clear or exclude from coverage any title

problems that emerge. Depending on the level of technology used, the 

accessibility of public documents, the relative efficiency of local 

government recorders’ offices, and other factors, this process can take

from a few minutes up to a few weeks or more. In some states, title agents 

also are responsible for claims up to a specific dollar amount. Most title 

agents also handle the escrow and closing processes and document 

recordation after the closing. In general, title agents issue the actual 

insurance policy and, after deducting expenses, remit the title insurer’s 

portion of the premium. 

Third, unlike premiums for other types of insurance, title insurance 

premiums are nonrecurring. That is, title insurers have only one chance to 

capture the cost of the product from the consumer, unlike other types of 

insurers that collect premiums at regular intervals for providing ongoing

coverage. The title insurance premium amount must cover losses for any 

future problems that were either not uncovered in the title agent’s search 

or, for a small number of policies, problems that emerge after the day of 

closing. 

 9

According to industry experts and analysts, the different loss and expense structure of the

title insurance industry reflects the fact that title insurance is primarily focused on

preventing losses through title searches and examinations, and that most property-casualty 

insurance is focused on compensating policyholders for losses. 

Page 9 GAO-07-401 Title Insurance
Fourth, title insurance has a different coverage period than other types of

insurance. With title insurance, coverage begins on the day of closing and

goes back in time. Most policies cover events that occurred in the past, 

including unpaid tax liens, judgments, issues with missing heirs, and 

forgeries in the document chain of title. The purpose of the title agent’s 

search is to turn up these problems before closing so that they can be

cleared or excluded from coverage. However, if a problem occurred in the 

past but only emerged after the day of closing and was not excluded from 

coverage, then the policy would offer protection to the lender and home 

owner. The comprehensiveness of the agent’s search can be a factor in 

minimizing such losses. For this reason, title insurance is often referred to 

as loss prevention insurance, in contrast to other types of insurance that

attempt to prospectively minimize exposure to claims. 

Finally, the title insurance market’s business cycle is more closely related 

to the real estate market and to interest rates than the business cycle for 

other types of insurance. Typically, this relationship is inverse, so that the 

revenues of title companies rise when interest rates fall, largely because 

lower interest rates usually lead to a surge in home buying and refinancing 

and thus increase demand for title services and products. 

Under current federal law, the regulation of insurance, including title 

insurance, is primarily the responsibility of the states. However, title 

insurance entities are also subject to RESPA, a federal law intended to 

improve the settlement process for residential real estate. Section 8 of 

RESPA generally prohibits the giving or accepting of kickbacks and 

referral fees among persons involved in the real estate settlement process. 

Section 8 also lays out the conditions under which ABAs are permissible. 

First, the affiliation must be disclosed to the consumer, along with a 

written estimate of charges. Second, ABA representatives may not require 

consumers to use a particular settlement service provider. Third, the only 

thing of value that ABA owners may receive, other than payment for 

services rendered, is a return on their ownership interest. In addition, 

HUD has issued policy statements that describe multiple factors, including 

what it considers to be core title services, that HUD will use in 

determining if an entity is a bona fide provider of settlement services. HUD 

is responsible for administering section 8 of RESPA, but its enforcement 

authority is limited to seeking injunctions against potential violations. 

Unlike other sections of RESPA (e.g., section 10, which authorizes HUD to 

assess civil money penalties for certain violations by entities that fail to 

provide escrow account statements), section 8 of RESPA does not 

authorize HUD to levy civil money penalties for violations. 

Page 10 GAO-07-401 Title Insurance
Title Insurance

Title insurance markets can be described by various characteristics, such 

as the following: 

• While high market concentration exists among national title insurers, they 

market insurance through large numbers of independent and affiliated 

agents, with the mix varying across states. 

• The use of ABAs—in which a real estate professional, such as a real estate

agent, owned a share of a title agency—varied. 

Title Insurance 

Market Is Highly

Concentrated at the 

Insurer Level, but 

Otherwise Differs 

across States 

• Processes used by agents to conduct searches and examinations in some 

states were more efficient than others, and the responsibilities of title 

agents also varied. 

• Premiums across states are difficult to compare, but they appeared to vary 

significantly.

Nationally, five title insurers, or underwriters, captured about 92 percent 

of the market in 2005 (see fig. 1). Most states were dominated by a group 

of two or three insurers, sometimes including a regional insurer. For 

example, in California, about 66 percent of the market share in 2005 was 

split nearly evenly between the largest two insurers—First American and 

Fidelity. The remaining approximately 33 percent of the market was 

predominantly split among the other three national insurers (25 percent) 

and five regional independent insurers (8 percent). Although they are 

national insurers, these five major underwriters sell and market title 

insurance in local markets through networks of direct operations, partial 

or full ownership of affiliates, and contracts with independent agents. 

According to the annual reports of the four largest title insurers, they each

use between 8,000 and 11,000 agencies to sell their insurance nationwide.

Page 11 GAO-07-401 
Figure 1: Title Insurer National Market Share as a Percentage of Direct Premiums 

Written, 2005 

Note: Total may not add up to 100 percent due to rounding. 

Most state markets have two types of title agents: affiliated and 

independent. Title insurers use both types of agents, depending on 

conditions in the local market, including local tax policies and established 

market practices, as well as the level of service the underwriter provides 

to the agents. Affiliated agents carry higher fixed costs to the insurer as 

owner, and underwriters told us that these costs were especially 

challenging when the market softened and the insurer’s tax liability for 

affiliated agents rose. However, insurers also said that with affiliated 

agents they had more control over the premium split and, because the 

agents were closely aligned with the underwriter, did not have to provide 

as much in services, such as training. Underwriters noted that they also 

benefited from contracting with independent agents because doing so kept 

their fixed costs low and allowed them to benefit from some tax 

advantages. However, according to the insurers, contracting has its 

disadvantages, by obliging the insurers to negotiate a competitive premium 

split (in nonpromulgated states) or risk having the agent establish a 

6%

8%

Old Republic

11%

18%

27%

29%

Source: GAO analysis of industry data.

All other insurers

Stewart

Land America

First American

Fidelity

Mix of Affiliated and 

Independent Agents 

Differs by State 

Page 12 GAO-07-401 Title Insurance
relationship with another underwriter.10 Independent agents, who work 

with several underwriters, also may not provide the guaranteed flow of 

business, and thus the same revenue stream, as affiliated agents. 

Underwriters balance these benefits and risks when determining which 

agents they will use in each state. Two underwriters told us that they strive 

to maintain about an equal balance between affiliated agents and 

independent agents. Other insurers told us that, because their expenses 

can be higher by virtue of their ownership interest in affiliated agents, they 

were reluctant to take on too many affiliated agents and preferred to 

contract with independent agents, especially when market conditions 

declined. However, several industry participants told us that underwriters’ 

purchase and use of affiliated agents in some states had increased 

significantly over the last 5 years. As shown in figure 2, affiliated agents 

dominated the market in California, the state with the largest total of 

premiums written, while independent agents capture the majority of the 

markets in Colorado, Illinois, and New York. Conversely, the Texas market 

was relatively more evenly balanced, with insurers, affiliated agents, and 

independent agents sharing the number of premiums written. In Iowa, the 

state-run Title Guarantee Division of the Iowa Finance Authority has a 

slight majority of the market and independent agents have most of the 

remainder. 

 10The term “nonpromulgated states” refers to those states where the title rate is determined

by a method other than a state regulatory body setting it. 

Page 13 GAO-07-401 Title Insurance
Figure 2: Title Insurance Premiums Written, by Source, 2005 

Iowa

Total

Colorado

Illinois

New York

Texas

California

4.5

$980.9

35.5

71.5

301.9

459.2

$108.4

$6,608.7

8.5

343.2

350.7

1,220.6

1,487.5

$3,198.3

44

9

22

13

2

28

74

Premiums

Written directly

by insurer

$2,928.4

0.8

75.4

45.4

25.6

410.6

$2,370.7

Written by

affiliated

agents

3.2

232.3

233.8

893.1

617.7

$719.1

$2,699.3

Written by

independent

agents

Total

Percentage of premiums for the state, by writer

Source: GAO analysis of title industry data.

15

53

10

20

25

31

3

41

38

68

67

73

42

23

a

 Dollars in millions

a

Premiums listed as being written directly by insurer are those written by the state-run Title Guarantee 

Division of the Iowa Finance Authority. Premiums written by affiliated or independent agents are 

premiums written by out-of-state title insurers on properties in Iowa.

Use of Affiliated Business 

Arrangements Appears to 

Be Increasing 

We found that the use of ABAs varied by insurer and location. ABAs 

generally involved a referring entity, such as a real estate or mortgage 

professional, or builder, having full or partial ownership of an agency (see

fig. 3). For example, a mortgage lender and a title agent might form a new 

jointly owned title agency, or a builder might buy a portion of a title 

agency. The owners of ABAs are to split the revenues in proportion to 

their ownership shares to satisfy antirebating laws. 

Page 14 GAO-07-401 Title Insurance
Figure 3: Example of an Affiliated Business Arrangement 

A

B $

Referring entity refers

customers to title agency

that is part of affiliated

business arrangement

Ownership interest

Title agency profits

and sends portion 

to referring entity

Referring entity 

$

A

B

Entity that refers customers

Title agency receiving referred business

Ownership interest

Path of referred customers

Profit made from referred customers

Customers

$

Source: GAO analysis of interviews with industry officials.

General structure and flow 

Title agency

Partially owned by

the referring entity

Nationally, the use of ABAs appears to be growing. For example,

according to a study done for the Real Estate Services Providers Council 

(RESPRO), affiliated title agents accounted for approximately 26 percent

of title-related closing costs in 2005, up from about 22 percent in 2003.11

Although precise data showing state-by-state growth were not available,

industry participants in some states—especially Colorado, Illinois,

Minnesota, and Texas—told us that the number of ABAs in their states had 

grown significantly.12

11RESPRO is a national nonprofit trade association of settlement service providers, 

including real estate broker-owners, real estate franchisers, mortgage lenders/brokers, title 

insurers/agents, home builders, and home warranty companies. Many of its members offer 

affiliated services through subsidiaries, joint ventures, and partnerships. 

12Although Minnesota was not in our sample, we spoke to state insurance regulators in the

state.

Page 15 GAO-07-401 Title Insurance
We found that while the basic title search and examination process shared 

certain elements across states, the process was more efficient in some 

states than in others. Figure 4 describes the common elements of the title

search and examination process, which begins with a request from the 

consumer’s representative and intake by the title agent. The agent then 

performs the search, and a title examiner hired by the title agent analyzes

the collected documents to identify any potential problems to be cleared. 

Once any identified problems are cleared, exempted from coverage, or 

insured over, the title agent prepares the closing documents and collects 

and disburses checks at the closing. Finally, the agent deposits collected 

funds in escrow accounts, records the deed or title with the relevant local 

government offices, and submits the title commitment to the insurer for 

policy issuance. 

Agents Conduct the Title 

Search and Examination 

Process Differently across 

States 

Figure 4: Common Elements of the Title Search and Examination Process 

Deed

Title order received from

consumer representative

(real estate agent,

mortgage broker, attorney,

other representative).

Information about all

interested parties entered

into data system

and verified.

Property identified in

local government

records and search

performed for all

pertinent property

title documents.

Title agent deposits

collected funds,

takes deed for recording,

produces policy, and

submits risk portion of title

insurance premium

to underwriter.

Title examiner analyzes

all documents and identifies

problems. Problems are

cleared, exempted from

coverage, or insured over.

Title agent prepares title commitment and other

necessary closing documents and distributes them

to involved parties. Title agent, closer, or escrow

officer collects/disburses funds with involved parties.

Intake/Request Identification/

Search Analysis and repair Closing Completion

Sources: GAO observation of title plant operations and analysis of comments made by title industry officials; Art Explosion (images).

Local government

records, hard and

electronic property

records, etc.

Buyer:

Seller:

Property:

Incoming

title order

Title

documents

Problem:

 Cleared

 Exempt from

 coverage

 Insured over

x

Commitment

letter

Closing

documents

$

Interested

parties

$ Underwriter

$ Policy

Agents in some states use primarily automated processes, either owning or 

purchasing access to a title plant.13 Because of these plants, the title search

process in these states can be very efficient, which can decrease the 

amount of time required to issue a title insurance policy. Some of the most 

advanced of these title plants have documents scanned from local 

government sources, indexed and cross-referenced by various types of 

 13Some state laws, such as those in Iowa and Texas, require title agents or abstractors to 

have access to a title plant. 

Page 16 GAO-07-401 Title Insurance
identifying information. Four of the title data centers we visited had 

electronic records going back 20 years or more. During a tour of one title 

plant in Texas, we observed a title examiner obtain nearly all documents 

pertinent to the title search and examination in electronic format within 

seconds. If the title examiner did not have immediate access to a 

necessary document, she would e-mail the owner of that information and 

have it sent electronically or through the mail from one of the search 

services to which the plant subscribed, usually within 1 day or less. For 

this plant, typical turnaround time for a completed title search, 

examination, and commitment for a title examiner simultaneously working 

on several titles was 2 to 3 days. In another highly automated plant located 

in a large urban center, we were told that the typical title search and 

examination took about 25 minutes. One of the nation’s largest title 

insurers, First American, recently announced that with new software 

developments, its agents could produce a fully insured title commitment in 

60 seconds for many refinance transactions. 

In contrast, in a less-efficient process, agents in some states must 

physically search public records, which can add to the time required to 

issue a policy. In New York, for example, title plants are rare, and title 

agents commonly employ abstractors and independent examiners who 

must go to various county offices and courthouses to manually conduct

searches. Including the process of clearing title problems and attorney 

review, one underwriter told us that in New York, the typical title 

insurance issuance took 90 to120 days for a purchase and 30 to 45 days for 

a refinance. Most historical data are proprietary to each underwriter and 

are based on previously insured titles. At an underwriter-owned title plant

in an East Coast city, described as typical for the region, we saw that 

although the plant held approximately 1.5 million records of previously 

insured titles, few records were updated when a new search came in on 

that same property. Personnel at the plant said that it was too laborintensive to consolidate all of the files, although not updating the files 

resulted in a large number of redundancies in records across the plant. 

Also, in some states, industry participants told us that delays in recording

and processing at local government offices contributed greatly to 

inefficiencies in the issuance process. 

Title Agents’ 

Responsibilities Also 

Differ across States 

We found that the extent of title agents’ responsibility for claims losses, 

involvement in the closing process, and ability to set premiums varied 

widely across states. For example, in some states, agents are responsible 

for a specific portion of losses on claims. In California and Colorado, the 

underwriter-agent agreement stipulates that title agents are responsible for 

Page 17 GAO-07-401 Title Insurance
up to the first $5,000 of a title claim.14 Underwriters said that this 

deductible gave agents an incentive to conduct more diligent searches and 

examinations. In other states, agents are not responsible for a specific 

portion of a claim but may take responsibility for some part or all of it, 

especially if the claim is small. According to agents in New York and 

Minnesota, it is faster, more efficient, and more customer-friendly for the 

agent to handle smaller claims rather than passing them on to the 

underwriter. An industry organization said that current, informal agent 

claims practices show that agents generally take responsibility for claims 

under $2,500. Independent agents told us that the industry is moving 

toward more risk borne by the agents. In fact, agent application and 

review documents that we obtained from underwriters showed that the 

number and amount of claims the agent was responsible for were criteria 

insurers used when deciding whether to retain independent agents. One 

underwriter told us that although their agents did not have deductibles, 

the insurer was able to recover about $10 million in funds from agents on 

claims the underwriter had already paid through aggressive follow-up on 

and investigation into possible errors on previously paid claims. 

Some agents are also involved in more aspects of the closing process. We 

found that some agents handled the entire closing process, including the 

escrow, while others did not handle the escrow portion. These practices 

varied within as well as across states. In California, for example, title 

agencies have both underwriter and agent-controlled escrow companies 

that handle the full escrow process and actively market those services. 

These agencies offer a full package of closing services, from title search, 

examination, and clearance to document preparation and disbursement of 

funds at the closing. Other title agents were independent from escrow 

companies. In some states, such as New York, where it is customary for 

the home buyer and seller to have a lawyer present at the closing, title 

agents employ closers, whose chief duty is to handle the checks for taxes 

and escrow and to record the deed. Similarly, in Illinois, the lawyers 

actually serve as attorney-agents and are prohibited by the underwriter 

from handling the escrow. 

Finally, in some states, title agents determine the amount to charge 

consumers for the search and examination portion of the premium, while 

in other states, they do not. The states where they do are referred to as 

 14California insurance department guidelines say that title agents cannot pay more than 

$5,000 of a claim. 

Page 18 GAO-07-401 Title Insurance
“risk-rate” states because only the insurance, or risk-based, portion of the 

premium is regulated. In these states, state regulators review underwriters’ 

rates for the risk-based portion of the premium, but the agents set the fees 

for search and examination services (generally the larger part of the cost 

to consumers) without regulatory review. According to ALTA, 30 states 

plus the District of Columbia are considered risk-rate states. The rest of 

the states, excluding Iowa, are considered to be all-inclusive because they 

incorporate charges for the risk-based portion of title insurance and other

fees, such as those for the search and examination, in the regulated 

premium. The premium may or may not include settlement and closing 

costs. In these all-inclusive states, agents are not able to determine the 

price they will charge for searches and examinations, because they are 

required to charge the rates set by the state or the underwriter. Insurers 

set their premium rates based on their own expected costs and how much 

of the premium they have agreed to split with the agent. 

Premiums Are Difficult to 

Compare across Markets, 

but Appear to Vary 

Significantly 

Because title insurance premium rates depend on the amount of the loan

or value of the home being insured, premiums differ widely across states. 

Figure 5 shows the premium rates for median-priced homes in major cities

in our sample states. 

Figure 5: Title Insurance Premium Rates for a Basic Owner’s Policy on MedianPriced Homes in Selected Areas, 2005 

Des Moines, IA

Dallas, TX

Denver, CO

Chicago, IL

New York, NY

Los Angeles, CA

145,500

147,600

247,100

264,200

445,200

$529,000

700a

871

1,216

1,025

2,190

$1,587

Median-priced home loan or value Owner’s policy rate

Source: GAO analysis of National Association of Realtors’ and title industry data.

Note: Rates are either from the largest underwriter or are promulgated rates. 

a

Lender’s policy rate used in the Iowa data because a rate was not given for the owner’s policy. 

Although the premium would be $146, according to Iowa Title Guaranty officials, additional required 

services would add approximately another $550, for a total of approximately $700. 

Page 19 GAO-07-401 Title Insurance
One reason title insurance premium rate comparisons are difficult is 

because, as we previously mentioned, items included in the premium 

varied by state. A study from insurance regulators in Florida, where rates 

are promulgated and include the risk portion only, noted that what allinclusive rates include varies even among the all-inclusive states.15

According to the study, in Texas and Pennsylvania, the premium includes 

the risk portion, search and examination costs, and settlement fees, while 

in California, the all-inclusive rate does not include settlement and closing 

costs. The Florida study also noted that one state (Utah) includes closing

costs but not searches and examinations, and another state (Illinois) 

allows the entire rate to be determined competitively as either risk-based 

or all-inclusive. 

A national survey conducted by Bankrate.com in 2006 also showed 

significant differences in title premiums across states.16 This survey of the

50 states and the District of Columbia compiled average mortgage closing

costs, including title insurance, search and examination and settlement 

costs, and origination fees, using data obtained from as many as 15 of the 

largest national lenders’ online quote systems. The survey calculated costs 

for a standard $200,000 loan in one Zip Code of the largest urban center in

each state. The data showed costs ranging from a high of $3,887 to a low of 

$2,713, with a national average of $3,024. Bankrate.com representatives 

attributed most of the difference across states to wide disparities in the 

cost of title insurance, which they found varied almost 64 percent, from a 

high of $1,164 to a low of $418. The average was $663. However, these data

must be viewed with caution because they do not account for differences 

in what could be included in the premium. Moreover, since these data 

came from only one Zip Code per state, they may not be representative of 

other localities. 

Industry officials said that rates vary because of differences in what was 

included in the rate and in standard business costs in each area. Nearly all 

of the industry participants we spoke with emphasized that title insurance 

is a local business, varying both within and across states. They said that 

state property, trustee, probate, and estate laws could partially explain the 

rate differences. In some states, these requirements make it much more 

 15Florida Office of Insurance Regulation, An Analysis of Florida’s Title Insurance Market: 

Three Studies That Provide a Comprehensive, Multi-Faceted Review of the Florida Title 

Insurance Industry (Tallahassee, FL: July 2006). 

16Closing Costs Survey, http://www.bankrate.com/brm/news/mortgages/ccmain2006a1.asp. 

Page 20 GAO-07-401 Title Insurance
expensive to do the search and examination work and clear all of the risks 

through the examination process. Experts told us that trying to compare 

rates across states would not be meaningful because of the differences in 

the components of the premium. 

Among the factors raising questions about the existence of price 

competition and the resulting prices paid by consumers within the title 

insurance industry are the following:

• consumers find it difficult to shop for title insurance, therefore, they put 

little pressure on insurers and agents to compete based on price; 

• title agents do not market to consumers, who pay for title insurance, but to 

those in the position to refer consumers to particular title agents, thus 

creating potential conflicts of interest; 

• a number of recent investigations by HUD and state regulatory officials 

have identified instances of alleged illegal activities within the title 

industry that appear to reduce price competition and could indicate 

excessive prices; 

• as property values or loan amounts increase, prices paid for title insurance 

by consumers appear to increase faster than insurers’ and agents’ costs; 

and 

• in states where agents’ search and examination services are not included

in the premium paid by consumers, it is not clear that additional amounts 

paid to title agents are fully supported by underlying costs. 

Disagreement exists between title industry officials and regulators over 

the actual extent of price competition within title insurance markets, with 

industry officials asserting that such competition exists and a number of 

regulators stating that a lack of competition ultimately results in excessive 

prices paid by consumers. 

For several reasons, consumers find it difficult to shop for title insurance 

based on price, raising questions about the existence of price competition 

in title insurance markets. First, most consumers buy real estate—and 

with it, title insurance—infrequently. As a result, they are not familiar with 

what title insurance is, what reasonable prices might be, or which title 

agents might provide the best service. According to a study commissioned 

Multiple Factors 

Raise Questions about 

the Extent of 

Competition and the 

Reasonableness of 

Prices in the Title 

Insurance Industry 

Lack of Consumer 

Knowledge about Title 

Insurance Results in Little 

Pressure on Insurers to 

Compete on Price 

Page 21 GAO-07-401 Title Insurance
by the Fidelity National Title Group, Inc., in response to proposed 

regulatory changes in California, it is typically not worth an individual’s 

time to become more educated about title insurance, because any 

resulting savings would likely be relatively small.17 That is, the cost to 

consumers of becoming sufficiently educated to make an informed 

decision is potentially higher than the risk of paying more to a title agent 

suggested by a real estate or mortgage professional. However, one 

potential consequence of a failure to shop around was noted by several of

the state insurance regulatory officials that we spoke with, who expressed 

concern that consumers may not be getting the discounts for which they 

are eligible. For instance, insurers may give (1) discounts on mortgage 

refinance transactions because the previous search and examination were 

fairly recent and (2) discounts to first-time home buyers or senior citizens. 

Several title industry officials agreed that consumers might not be aware 

of such discounts and may, in some cases, not be receiving discounts to 

which they are entitled. 

Second, consumers may have difficulty comparing price information from 

different title agents because many title agents also charge for services 

that are not included in the premium rate, such as fees related to real 

estate closing and other administrative fees. In states where title agents 

charge separately for search and examination services, such charges can

be as large as the title insurance premium itself. Thus, even if consumers 

collected and compared premium rates, which are posted on some states’ 

Web sites, they might not get an accurate picture of all the title-related 

costs they might pay when using a particular agent. 

Third, title insurance is a smaller but required part of a larger transaction 

that consumers are generally unwilling to disrupt or delay. As we have 

seen, lenders generally require home buyers to purchase title insurance as

part of any real estate purchase or mortgage refinancing transaction. 

However, purchasing title insurance is a relatively small part of such 

transactions. For example, according to an analysis by the Fidelity 

National Title Group, Inc., in 2005 in California, on a transaction with a 

sales price of $500,000 and a loan amount of $450,000, title insurance 

costs, on average, amounted to only 4 percent of total closing costs, 

including the real estate agent’s commission (see fig. 6). Even when the 

 17Gregory Vistnes, An Economic Analysis of the California Department of Insurance 

Proposal to Impose Rate Regulation in the California Title Insurance Industry

(Washington, D.C.: August 2006). 

Page 22 GAO-07-401 Title Insurance
seller pays the real estate agent’s commission, title insurance costs are still 

small compared with the size of the buyer’s transaction. In addition, it 

appears that by the time consumers receive an estimate from the lender of

their title insurance costs as part of the Good Faith Estimate, a title agent 

has already been selected, and the title search has already been requested 

or completed.18 To shop around for another title insurer at that point in the 

process could also threaten to delay the scheduled closing. According to a 

number of title industry officials and state insurance regulators we spoke 

with, most consumers place a higher priority on completing their real 

estate transaction than on disrupting or delaying that transaction to shop 

around for potentially small savings. 

 18RESPA requires lenders to provide consumers with an estimate of the costs a consumer 

will likely have to pay, called a Good Faith Estimate, prior to the closing of a mortgage

transaction. 

Page 23 GAO-07-401 Title Insurance
Figure 6: Average Allocation of Closing Costs in California, 2005 

Note: Calculations done using a $500,000 sales price and a $450,000 loan amount. We did not verify 

the data supporting this analysis.

HUD publishes an informational booklet designed to help fulfill RESPA’s 

goal of helping consumers become better shoppers for mortgage 

settlement services, including title insurance. Although this document 

provides much useful information, it is generally distributed too late in the 

home-buying process to help consumers with respect to title insurance, 

and it lacks some potentially useful information. RESPA currently requires

lenders to provide the booklet to consumers within 3 days of the loan 

application. HUD officials recognize the need to get this information to 

consumers earlier and recommended in a 1998 study that real estate 

agents, as well as lenders, provide the information at first contact.19

4% 4%

P&C insurance

(including home warranty)

12%

64% 13%

2% Escrow fees

1% Other costs

Source: Fidelity National Title Group, Inc.

Title insurance

Government taxes/fees

Lender fees

Real estate commission

1,739

975

$331

2,088

5,846

6,150

30,000

Total $47,129

Closing costs Amount

 19Board of Governors of the Federal Reserve System, Department of Housing and Urban 

Development, Joint Report to the Congress Concerning Reform to the Truth in Lending 

Act and the Real Estate Settlement Procedures Act (Washington, D.C.: July 1998). 

Page 24 GAO-07-401 Title Insurance
Furthermore, RESPA only requires the information to be distributed in a 

transaction involving a real estate purchase, and not in other transactions, 

such as mortgage refinances, where title insurance is also required by 

lenders. The usefulness of the informational booklet is further limited by 

the absence of information on the discounts most title insurers provide 

and on potentially illegal ABAs. 

Because consumers may not have access to potentially useful information 

when purchasing title insurance, they may not be able to make wellinformed decisions on the purchase of title insurance. Specifically, 

consumers may face difficulty in independently collecting information on 

all amounts charged by title agents in order to comparison shop. In 

addition, the limitations in the content of HUD’s information booklet and 

when consumers receive it can result in consumers’ getting information 

too late in the process, thereby hindering their ability to influence the 

selection of a title agent or insurer. Moreover, several state insurance 

regulators expressed concern that consumers might not be getting all 

available discounts because they do not know they are available or that 

they are entitled to the discounts. In addition, HUD officials said that the 

use and complexity of ABAs in the title industry has increased, and 

consumers could benefit from additional information in this area. 

Another factor that raises questions about the existence of price 

competition is that title agents market to those from whom they get 

consumer referrals, and not to consumers themselves, creating potential

conflicts of interest where the referrals could be made in the best interest 

of the referrer and not the consumer. Because of the difficulties faced by

consumers in shopping for title insurance, consumers almost always rely 

on a referral from a real estate or mortgage professional. In fact, some 

insurance regulatory officials we spoke with said they are concerned that 

consumers may not even be aware they are able to choose their own title 

agent and insurer. According to title industry officials, because of 

consumers’ unfamiliarity with and infrequent purchases of title insurance, 

it is not cost-effective to market to them. Rather, title agents market to and 

compete for referrals from real estate and mortgage professionals. 

According to title industry officials, competition among title agents for 

consumer referrals is very intense and motivates them to provide excellent 

service to real estate and mortgage professionals. This is because if they 

do not provide good service, those professionals will send their future 

referrals elsewhere. Both title and real estate industry officials told us that 

such professionals have a strong interest in customers’ having a good 

Title Agents Market Not to 

Consumers, but to Those 

in a Position to Make 

Referrals, Creating 

Potential Conflicts of 

Interest 

Page 25 GAO-07-401 Title Insurance
experience with respect to the portion of a closing conducted by a title 

agent, because customers’ experiences there will reflect back on the 

professional. As a result, they said, such competition on the basis of 

service benefits consumers. 

However, this competition among title agents for consumer referrals is 

also characterized by potential conflicts of interest, since those making the 

referrals may have the motivation to do so based on their own best 

interests rather than consumers’ best interests. Real estate and mortgage 

professionals interact more regularly with title agents and insurers than do 

consumers and, thus, are likely to have better information than consumers 

on the prices and quality of work of particular title agents and insurers. To 

the extent the interests of those professionals are aligned with those of the 

consumers they are referring, the knowledge and expertise of those 

professionals can benefit consumers. However, conflicts of interest may 

arise when the professional making the referral has a financial interest in 

directing the consumer to a particular title agent. Under such 

circumstances, the real estate or mortgage professional may be motivated 

to make a consumer referral not based on the customer’s best interests but 

on the professional’s best interests. For example, a real estate professional 

may be a partial or full owner of a title agency, such as through an ABA, 

and therefore receive a share of the profits earned by that agency. As such, 

the professional may have an incentive to refer customers to that title 

agency. 

Page 26 GAO-07-401 Title Insurance
In recent years, HUD and state insurance regulators have identified a 

number of allegedly illegal activities related to the marketing and sale of 

title insurance that appear to be designed to obtain consumer referrals 

and, thus, raise questions about competition and, in some cases, the prices 

paid by consumers (see sidebar). In addition, several title insurers and 

agents told us that they lost market share because they did not provide 

some compensation for consumer referrals. The payment or receipt of 

compensation for consumer referrals potentially reduces competition 

because the selection of title insurer or agent might not be based on the 

price or quality of service provided, but on the benefit provided to the one 

making the referral. The giving or receiving of anything of value in return 

for referral of consumers’ title insurance business is a potential violation

of RESPA and many state laws. For example, it might be illegal for a title 

insurer to provide free business services to a realtor in exchange for that 

realtor’s referring consumers to the title agent. It might also be illegal for 

the realtor to accept those services.

Nonetheless, state and federal regulators have identified a number of 

alleged instances of such payments, resulting in those involved paying

over $100 million in fines, penalties, or settlement agreements. Table 1 

summarizes these investigations. From 2003 to 2006, insurance regulators 

in three of our six sample states had concluded at least 20 investigations 

related to the alleged payment of referral fees, involving over 52 entities, 

including title insurers, title agents, and builders.20 As a result of these 

investigations, the entities involved were ordered to pay or agreed to pay

approximately $90.6 million in the form of consumer refunds, fines, and 

settlements. Over the same period, HUD concluded at least 38 

enforcement actions resulting in settlements related to alleged referral fee 

violations. These actions involved at least 62 entities and resulted in those 

entities’ being ordered to pay or agreeing to pay approximately $10.7 

million. 

Alleged Illegal Activities 

Appear to Reduce 

Competition and Could 

Indicate Excessive Prices 

Paid by Consumers 

Examples of Allegedly Illegal Referral 

Fees Described in Investigations by HUD 

and State Insurance Regulators

• A title agent paid real estate agents’ 

business training and printing expenses.

• A title agent provided trips, entertainment, 

and catering for entities involved in real 

estate transactions.

• A title agent contributed to a pool of funds

that was given away in a drawing among real 

estate agents.

• A title agent paid an excessive rate to rent

a conference room from a real estate 

company.

• Title agents provided free or below-cost 

marketing services to real estate agents.

 20Entities involved in multiple cases and settlements were counted once for each case and 

settlement in which they were involved. 

Page 27 GAO-07-401 Title Insurance
Table 1: Information on Closed Cases and Settlements Involving Referral Fees Resulting from Investigations by Insurance 

Regulators in Six Sample States and HUD, 2003-2006 

Dollars in millions 

Investigating 

organizationa

Closed cases and

settlements 

involving referral 

fees

Entities 

involvedb

Amount that

entities were 

ordered to pay 

or agreed to payc

Portion of total 

payments 

involving captive 

reinsuranced

State insurance regulators 

California Department of Insurance 12 26 $61.3 $37.9

Colorado Department of Regulatory Agencies, 

Division of Insurance 6 24 25.3 25.3

New York State Insurance Department 2 2 4.0 -

 Subtotal 20 52 $90.6 $63.2

HUDe38 62 10.7 3.6

 Subtotal 38 62 $10.7 $3.6

Total 58 114 $101.3 $66.8

Source: GAO analysis of state and HUD data.

a

Insurance regulators in Illinois, Iowa, and Texas, our other sample states, did not have any such 

closed cases or settlements. 

b

Entities involved in multiple cases and settlements were counted once for each case in which they

were involved. 

c

Amounts paid included any refunds to consumers, fines, or settlement amounts. 

d

In captive reinsurance arrangements, a home builder, real estate broker, lender, title insurance 

company, or some combination of these entities forms a reinsurance company that works in 

conjunction with a title insurer. Some investigations alleged that these arrangements were used as a 

means of paying referral fees. 

e

Amounts paid to HUD reflect only negotiated settlements, because HUD cannot levy civil money 

penalties. 

Several insurance regulators in states outside of our sample states, while 

not completing enforcement actions or reaching settlement agreements, 

expressed concerns over activities related to referral fees. For example, in 

October 2006, the Washington State Office of the Insurance Commissioner 

published the results of its investigations into referral practices in the title 

industry in Washington.21 According to the report, the use of inducements 

and incentives by title companies to obtain title insurance business 

appeared to be “widespread and pervasive,” and these inducements were 

used to influence referrals by real estate agents, banks, lenders, builders, 

 21Washington State Office of the Insurance Commissioner, An Investigation into the Use of 

Incentives and Inducements by Title Insurance Companies (Olympia, WA: October 2006). 

Page 28 GAO-07-401 Title Insurance
developers, and others. The inducements included, among other things,

the provision of advertising services, open houses, entertainment, and 

educational classes. According to the report, the regulator decided not to 

take any enforcement actions on the basis of the activities they identified

because of the expense of doing so and because the regulator accepted 

some responsibility for allowing such a situation to develop. However, the 

report also stated that the regulator would put the industry on notice that

there would be consequences for any future violations. 

In Illinois, the state title insurance regulator issued a series of bulletins 

and informational handouts in 2005 and 2006 that expressed concerns over

potentially illegal referral fees and inappropriate ABAs.22 The regulator had

found that some title agents were using title service companies (owned by 

title insurers) that in some cases performed almost all title-related work, 

such that all the title agent had to do was sign and return some documents 

in exchange for receiving part of the premium. According to the regulator,

such arrangements would violate state law requiring title agents to 

perform certain minimal activities in return for fees received from 

consumers. The regulator told us that the companies involved in these 

activities were cooperative in ceasing such activities and, as a result, the 

regulator was not pursuing any enforcement actions. Such arrangements, 

however, (1) may constitute an illegal referral fee under RESPA and 

(2) appear to be very similar to activities that were the subject in Illinois of 

state and HUD investigations in 1990 and 1991, resulting in a $1 million 

settlement between HUD and the title insurer involved. 

Finally, in April 2006, the state title insurance regulator in Alaska 

published a summary of title insurance examinations in which they 

expressed concern that title agents and real estate service providers were 

entering into business arrangements that blurred the line between 

legitimate transactions and illegal kickbacks.23 Such arrangements, the 

report noted, may undermine competition and be an indication that 

premium rates are excessively high. The report stated that the insurance 

 22Title Insurance Section, Division of Financial Institutions, Illinois Department of Financial 

and Professional Regulation, Bulletin 1-05: Title Insurance Agent Requirements

(Springfield, IL: July 2005); Title Insurance Industry Meeting Informational Handout 1-

06 (Springfield, IL: February 2006); and Title Insurance Industry Meeting Informational

Handout 2-06 (Springfield, IL: February 2006). 

23Division of Insurance, Alaska Department of Commerce, Community, and Economic 

Development, Summary of Title Insurance Examinations: Division of Insurance 

(Juneau, AK: April 2006). 

Page 29 GAO-07-401 Title Insurance
regulator is contemplating new regulations regarding the legality of these 

arrangements, but the regulator will first obtain industry input through 

public hearings. Overall, the alleged referral fee arrangements identified in

the state and HUD investigations could potentially indicate that those 

making consumer referrals did so based on their own interests, and may 

not have resulted in obtaining the best prices for consumers. 

From 2003 through 2006, state and HUD investigations of captive 

reinsurance arrangements, a potential form of referral fees, resulted in 

payments by insurers and other entities of approximately $66.8 million, as

previously shown in table 1.24 Specifically, we identified 13 investigations 

involving 37 entities that were related to captive reinsurance 

arrangements, with 1 multistate settlement agreement involving activities 

in 26 states. In such arrangements, a home builder, real estate broker, 

lender, title insurance company, or some combination of these entities 

forms a reinsurance company that works in conjunction with a title 

insurer (see sidebar). The insurer agrees to “reinsure” all or part of the 

business it receives from the reinsurer’s owners with the reinsurer by 

paying the company a portion of the premium (and allegedly transferring a 

portion of the risk) for each title transaction. Investigators alleged that the 

amounts received by these reinsurers exceeded the risk they assumed—

particularly because virtually no claims were filed with either the insurer 

or the reinsurer—and considered these arrangements as a way to pay for 

referrals, allegedly violating RESPA’s prohibitions on such payments. In 

settlement agreements with a lender and several home builders in 2006, 

HUD stated that there is almost never a bona fide need or business 

purpose for title reinsurance on a single family residence, especially from 

an entity or an affiliate of an entity that is in a position to refer business to 

the title insurer. In addition, HUD stated that when the payments to the 

captive reinsurer far exceed the risk borne by the builders, lenders, or real 

estate brokers, there is strong evidence that such an arrangement was 

created to pay referral fees and, therefore, is illegal. Figure 7 provides an 

example of a captive reinsurance arrangement described in a multistate 

settlement administered by the Colorado Division of Insurance in 2005. 

Allegedly Illegal Captive 

Reinsurance Arrangements 

Could Indicate Consumers 

Were Paying Excessive Prices 

for Title Insurance 

Example of a Captive Reinsurance 

Arrangement

In one multistate settlement that involved 26 

state insurance regulators, regulators alleged 

that title insurers and home builders created 

captive reinsurance arrangements. Under 

these arrangements, the insurers deducted a

processing fee of $350 from the premium, 

then paid 50 percent of the remainder to a

reinsurer for assuming 50 percent of the 

policy risk. The reinsurers, in turn, provided 

referrals to the title insurers. For example, in 

Colorado, a party to the settlement, the 

premium charged by one of the companies

involved for an owner’s and lender’s policy on 

a $250,000 loan and purchase price was

$1,614. In 2005, the combined loss ratio for 

all insurers in Colorado was approximately 4.5 

percent. Under the arrangement described by 

regulators, on a hypothetical $250,000 

transaction, the reinsurer would collect 

approximately $632 for assuming expected 

losses of about $36 (4.5 percent of the $1,614 

premium), for a net profit of about $596. In 

other words, about 37 percent of the $1,614 

paid by the consumer would allegedly go to 

the reinsurer as compensation for its builder, 

lender, or real estate broker-owner allegedly 

referring business to the insurer.

 24Reinsurance is a mechanism that insurance companies routinely use to spread risk 

associated with insurance policies. Simply put, it is insurance for insurance companies. 

Page 30 GAO-07-401 Title Insurance
Figure 7: Example of an Alleged Captive Reinsurance Arrangement

Consumer

Builder

Title insurer Reinsurance

company $

$

Consumer pays

premium to

title insurer

Consumer

purchases home

from builder

$

Insurer gives reinsurance

company 50% of premium

(after deduction for title search)

for assuming small amount of risk

As part owner, builder

shares in profits of

reinsurance company

$

Referral relationship (builder agrees to refer consumer to title insurer)

Owner relationship (builder owns reinsurance company)

Source: GAO.

According to several state insurance regulators, the activities involved in 

such captive reinsurance arrangements suggest that title insurance 

premiums paid by consumers may be substantially higher than the cost of

providing that insurance. The arrangements generally involved a title 

insurer taking the premium from a consumer, subtracting a certain amount 

to cover the cost of a title search and examination, then splitting the 

remainder with the reinsurer. On the basis of details provided in a 

multistate settlement, insurers were allegedly giving away as much as onethird or more of the premiums consumers paid in order to obtain 

consumer referrals. In 2005, industrywide loss and loss adjustment 

expenses only totaled about 5 percent of the total premiums written. The 

regulators stated that insurers’ willingness to pay such a large portion of 

the premium to obtain consumers’ title insurance business suggested that

insurers overcharged consumers for this insurance. 

A number of investigations found that ABAs were allegedly being used to 

compensate ABA owners—often real estate or mortgage professionals—

for consumer referrals, raising additional questions about competition in 

the title insurance industry. RESPA allows ABAs, provided that (1) a 

disclosure is made to the consumer being referred that describes the 

nature of the relationship, including financial interests, between the real 

estate settlement service provider and the person making the referral; 

(2) compensation for the referral is limited to a return on the ownership 

interest; and (3) the consumer being referred is not required to use a 

particular title agent. HUD has also issued a policy statement setting forth 

factors it uses to determine whether an ABA is a sham under RESPA or a 

A Number of Investigations 

Found ABAs Allegedly Being 

Used to Pay Referral Fees, 

Raising Questions about the 

Cost and Benefits of ABAs to 

Consumers 

Page 31 GAO-07-401 Title Insurance
bona fide provider of settlement services. These factors include whether 

the entity actually performs substantial services in return for fees 

received, the entity has its own employees to perform these services, and

the entity has a separate office. Nonetheless, federal and state 

investigations identified a number of ABAs that were alleged to be “shell” 

title agencies that either had no physical location, employees, or assets or 

did not actually perform any title services. Regulators alleged their 

primary purpose was to serve as a pass-through for payments or 

preferential treatment given by the title agent to real estate agents and 

brokers, home builders, attorneys, or mortgage brokers for business 

referrals. Over the past 4 years, HUD has completed at least 9 

investigations of ABAs, involving at least 17 entities and resulting in 

approximately $1.8 million being paid by those entities in settlements and 

refunds. A Colorado investigation found that a single licensed title agent 

was owner or part owner of 13 sham title agencies that were allegedly

used to pay referral fees to mortgage brokers. 

A number of regulators and industry participants we spoke with expressed 

concerns about the growing use of ABAs in the title industry. For example, 

HUD officials have said that while properly structured ABAs may provide 

some consumer benefits, they also create an inherent conflict of interest 

as the owner of an ABA is in a position to refer a consumer to that same 

ABA. They expressed concern that ABAs could be used as a means to 

mask referral fees, which are generally illegal under RESPA, and that they 

were seeing more complex arrangements in which it was becoming 

increasingly difficult to trace the flow of money and to determine if the 

agents involved in ABAs were actually performing core title services. 

Several state insurance regulators we spoke with expressed similar 

concerns. For example, Colorado insurance regulatory officials were 

concerned over the extent of sham ABAs in Colorado that were potentially

being used as a means to pay referral fees. Those officials also said that, 

on the basis of their work with NAIC’s Title Insurance Working Group, 

other state insurance regulators that had begun to examine ABAs were 

also finding potentially illegal activities. For instance, in a September 2005

settlement in Florida, 60 sham title agencies affiliated with 1 underwriter 

were alleged to have been fronts for referral fees.

Some title industry participants expressed concern that ABAs might also 

restrict competition. They said that when a real estate or mortgage

brokerage firm, for example, owns an ABA, other title agents are generally 

barred from marketing their services to individuals working for that firm. 

In addition, they said that most or all of the consumer referrals from a 

brokerage that is an owner of an ABA generally go to that ABA. As a result 

Page 32 GAO-07-401 Title Insurance
of this guaranteed order flow, they said, the title agents at that ABA might 

not be as interested in competing on price or service. 

In contrast, some title industry officials said ABAs can be beneficial 

because they provide consumers with better service and potential cost 

savings. According to an industry organization, ABAs can increase 

consumer satisfaction through the convenience of one-stop shopping. 

Furthermore, they benefit their owners and consumers by giving owners 

greater accountability and control over quality. Industry participants also 

stated that because of the ability to take advantage of efficiencies, ABAs 

can result in potential cost savings for the consumer. A recent study 

sponsored by RESPRO, an industry group that promotes ABAs, concluded 

that title agents that are part of an ABA do not charge consumers any more 

than title agents that are not part of an ABA.25 ABA proponents, and others, 

also stated that ABA owners, such as real estate or mortgage brokers, 

often have little leverage in encouraging their real estate agents and 

brokers to refer consumers to the ABA title agent. They said that these 

individuals compete based on their reputation, and that recommending a 

title agent that provided poor service would damage that reputation. As a 

result, they will only refer consumers to an ABA title agent if it provides 

good service. Industry organizations we spoke with said that they did not

collect data on the percentage of business ABA title agents get from their 

owners’ businesses. 

Overall, the concerns expressed by regulators and some industry 

participants over ABAs raise questions about the potential effects of some 

ABAs on consumers. Specifically, concerns about some ABAs being used 

as a means of paying illegal referral fees raise questions about whether 

referrals are always being made in consumers’ best interests. In addition, 

concerns about some ABAs potentially restricting competition among title 

agents raise questions about the extent of competition that is beneficial to

consumers. 

 25Donald Martin and Richard Ludwick, Affiliated Business Arrangements and Their 

Effects on Residential Real Estate Settlement Costs: An Economic Analysis (October

2006). 

Page 33 GAO-07-401 Title Insurance
Another factor that raises questions about the prices consumers pay for 

title insurance is that as the purchase price or loan amount on which a 

policy is issued increases, the amount paid by consumers appears to 

increase faster than the costs incurred by insurers and agents in producing 

that policy. A number of title insurers and agents we spoke with said that 

they made more money on high-priced transactions than on low-priced 

transactions because, while premiums increased with price, insurers’ 

losses rose only slightly and agents’ search and examination costs 

generally either did not increase or, in many cases, fell. In fact, several title 

insurers and agents said that transactions involving less-expensive 

properties often cost agents more to complete because they required 

agents to correct more title defects than on more expensive transactions. 

As a result of this pricing structure, writing title insurance on higher-value

purchases and mortgages can be quite profitable for title insurers and 

agents. 

Title industry officials told us that while high-value transactions could be 

quite profitable for title insurers and agents, this profit was necessary to 

subsidize the lower profits or even losses from smaller transactions. These 

officials also told us that if insurers charged consumers on the basis of the 

cost of the actual work done, consumers buying relatively inexpensive 

properties would pay more than they currently did. However, while we 

asked title industry officials for data to support their assertion that they 

often lost money on low-priced transactions, they said that they did not 

collect financial information that would allow them to provide such data. 

Thus, we could not determine whether insurers or agents were actually 

losing money on any transactions. 

As Coverage Amounts 

Increase, Premiums Paid 

by Consumers Appear to 

Increase Faster Than 

Insurer and Agent Costs 

Industry Officials Said That the 

Current Price Structure 

Subsidizes Consumers in 

Lower-Value Transactions, but 

They Could Not Provide 

Supporting Data 

According to industry officials, insurers and regulators purposely designed 

the current premium rate structures with an element of subsidization built 

in—that is, premiums for high-priced transactions were intended to 

subsidize the costs associated with lower-priced transactions. Among the 

six state insurance regulators we spoke with, although most agreed that 

insurers made more money on higher-priced transactions, only one told us

that subsidization of consumers on lower-priced transactions was 

intentional on the part of the state. Among the rest, three said that there 

was no intentional subsidization, and two said that they did not know. 

Page 34 GAO-07-401 Title Insurance
Recent high profits within the title insurance industry have raised 

additional questions about the prices being paid by consumers. Several 

title insurance industry officials acknowledged that insurers’ profits had 

been good over the past several years as a result of increased home prices

and large numbers of consumers refinancing their home mortgages, but

these officials said that such profits made up for very low profits during 

weaker markets. However, we found that title insurers’ financial 

performance, as measured by return on equity, has been positive since at 

least 1992 and, in every year except one, has been above that of the 

property-casualty insurance industry as a whole. As shown in figure 8, the 

combined return on equity for the largest five title insurers has been at or

above 9 percent, in every year except one, over the period from 1992 to 

2005, and in most years it was above 12 percent. Over that same period, 

only one insurer had a year with a negative return on equity. In addition, 

during 2006 public conference calls with financial analysts, several of the

largest insurers said that they expected business to be profitable even 

during the weakest real estate markets. 

Industry Officials Said That 

Recent Higher Profitability 

Compensated for Years of 

Lower Profitability, but 

Industry Return on Equity Has 

Been Relatively Stable 

Page 35 GAO-07-401 Title Insurance
Figure 8: Combined Return on Equity for the Five Largest Title Insurers, and the Property-Casualty Insurance Industry as a 

Whole, 1992-2005 

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Percentage

-5

0

5

10

15

20

Source: GAO analysis of insurer financial data submitted to SEC and Insurance Services Office 

and Insurance Information Institute data.

Five largest title insurers

Property-Casualty insurance industry as a whole

Year

Note: The combined return on equity data for title insurers are based on consolidated operating 

results, which for some title insurers may include some services other than title insurance. 

An industry-sponsored study stated that several insurers had reduced title 

insurance rates in the last several years, and that such reductions provided

evidence of price competition, at least in California.26 We were able to 

obtain historical premium rate information in five of our six sample states. 

Between 2000 and 2005, premium rates for the median-priced home went 

down in three of those five states, stayed the same in one state, and 

increased by only 2 percent in the other state (see fig. 9). However, 

because total premiums are determined by applying that rate to the home 

price or loan amount, and median home prices increased substantially 

over that period, total premiums paid by consumers in most of our sample 

states also increased substantially. For example, among these five sample

states, consumers’ premiums fell in one state, but rose in the remaining 

 26An Economic Analysis of the California Department of Insurance Proposal. 

Page 36 GAO-07-401 Title Insurance
four states, sometimes dramatically. Specifically, premiums decreased by 

12 percent in one state but increased 93 percent in another, and in one

state where premium rates fell by 29 percent, actual premiums paid rose 

by 75 percent. Historical information on possible additional amounts 

charged by title agents in our sample states was not available.

Figure 9: Percentage Change in Premium Rates and Premiums Paid on MedianPriced Homes in Selected Areas in Five Sample States, 2000-2005 

Dallas, TX

Des Moines, IAc

Chicago, IL

New York, NY

Los Angeles, CA

-27b

0a

2a

-3b

-29

Premium rate per $1,000 Premium paid by consumer

Owner’s policy on median-priced home—change in:

Source: GAO analysis of data provided by the National Association of Realtors, state insurance regulators, and title insurers.

%a

-12

25d

69

93

75%

Change in median

home price

20

25

66

98

145%

Percentage change increase

Percentage change decrease

Note: We were unable to obtain historical premium rate information in the sixth sample state—

Colorado. 

a

Premium rates in California, Illinois, and Iowa are those for the insurer writing the most premiums in 

2005. 

b

Premium rates in New York and Texas are those promulgated by the state insurance regulator. 

c

Lender’s policy rate was used in the Iowa data because a rate was not given for the owner’s policy. 

d

Premium paid by consumer does not include any additional amounts that may have been charged by

title agents. 

In States Where Agents 

Charge Separately for 

Search and Examination 

Services, It Is Unclear 

Whether Those Charges 

Are Fully Supported by 

Underlying Costs 

One more factor that raises questions concerning the prices consumers 

pay for title insurance is that in states where agents’ charges for their 

search and examination services are not included in the premium paid by 

the consumer (i.e., agents charge separately for these services), it is 

unclear whether consumers may be overpaying for those services. The 

lack of clarity stems from the way in which title insurers determine 

premium rates that consumers will pay. 

Page 37 GAO-07-401 Title Insurance
Officials from title insurance companies told us that they generally 

determined their premium rates on the basis of their expected expenses, 

which include losses from claims, as well as the amounts retained by the 

title agents that write insurance for them. Title insurers know what share 

of consumers’ premiums the title agents that write policies for them will 

retain—generally around 80 to 90 percent—and what share the insurer will 

receive.

27 Insurers then set their premium rates at a level sufficient to 

ensure that their share of the premiums will be enough to cover their 

expected costs and earn them a reasonable profit. These calculations take

into account the portion of the premiums that title agents retain, but not 

whether that amount reflects the agents’ actual costs. Officials of 

insurance companies and title agencies told us that the split was 

negotiated between the insurer and agent on the basis of a number of 

factors, including the agent’s volume of business, the quality of the agent’s 

past work, and the insurer’s desire to increase its share of business in a 

certain geographic area. Among our sample states, the amount retained by

title agents ranged from around 80 percent in one state to 90 percent in 

another (see fig. 10). Some insurance company officials told us that they 

had an idea of what agents’ costs should be based on their experience with

their own direct agents, but these officials said that they did not analyze 

how the amounts retained by agents compared with those costs. 

 27Title insurers also have direct operations where none of the premium is retained by an 

agent. As a result, while title agents typically retain from 80 to 90 percent of the premium 

paid by consumers, in 2005, agents retained only 70 percent of total premiums written by 

insurers. 

Page 38 GAO-07-401 Title Insurance
Figure 10: Typical Premium Splits between Insurers and Agents in Six Sample 

States 

Iowa

Illinois

Texas

New York

Colorado

California

a

80

85

85

86

90

a

20

15

15

14

10

Percentage premium split between title insurers and agents

Source: GAO analysis of interviews with title insurers, title agents, and state insurance regulators.

% %

Title agent

Title insurer

Note: We did not independently verify the information in this figure. 

a

There is no premium split in Iowa on policies issued by the state-owned Iowa Title Guaranty Division. 

Insurers that we spoke with also told us that they generally share the same 

percentage of the premium with their agents, around 80 to 90 percent, 

regardless of whether those agents were in states where consumers were 

to pay for agents’ search and examination services within the premium 

rate—known as all-inclusive states—or whether they were in states where 

agents can charge consumers separately for those services—known as 

risk-rate states. However, if title agents are charging separately for their 

search and examination services, outside of the premium, you would 

generally expect the percentage of the premium retained by agents to be

lower because they would not need to recover the costs for those services

from the premium. Because insurers told us that the percentage of the

premium given to the agent does not depend on whether the title agent is 

in a risk-rate or all-inclusive state, this practice raises the possibility that in 

some risk-rate states, title agents may be (1) retaining 80 to 90 percent of 

the premium—a percentage meant to be sufficient to cover agents’ search 

and examination costs in all-inclusive states—and (2) charging the 

consumer a separate, additional amount intended to pay for those same 

services. According to HUD officials, in risk-rate states, the amount 

consumers pay title agents for their search and examination services, 

which is in addition to the title insurance premium, can sometimes be as 

large as the premium itself. However, reliable data did not exist to 

Page 39 GAO-07-401 Title Insurance
determine whether consumers in risk-rate states consistently paid more, in

total, than those in all-inclusive states. 

Disagreement Exists 

among Industry and 

Regulatory Officials over 

the Extent of Price 

Competition and the 

Appropriateness of Title 

Insurance Prices 

While many title industry officials acknowledge that competition in title 

insurance markets is based primarily on service rather than price, 

disagreement exists between the industry and regulators over the extent of

actual price competition. According to some of the title industry officials 

we spoke with, price competition does exist within the title insurance 

industry. While these officials acknowledged that consumers generally rely 

on referrals from real estate and mortgage professionals, they argued that 

these professionals could have an interest in obtaining lower-priced title 

services for their customers and, thus, could exert downward pressure on 

premium rates. Others cited various factors, such as changes in premium 

rates and increased levels of coverage, as evidence of price competition 

and have stressed the benefits for consumers of competition that is based

on service. 

In contrast, insurance regulators in two of our sample states have 

concluded that premium rates are too high relative to costs, potentially 

due to a lack of price competition. In California, the state insurance 

regulator concluded in 2006 that title insurance markets were lacking 

competition, resulting in increased prices for consumers. The regulator 

there has also proposed lowering current title rates. In Texas, where title 

insurance premium rates are promulgated by the state insurance regulator,

in each of the last two rate hearings, the regulator has proposed a 

premium rate reduction to account for a competitive structure that inflates 

prices for consumers. That is, the regulator has requested premium rate 

reductions to account for a market structure in which consumers pay for 

title insurance but others generally choose the title agent and insurer, 

which the Texas regulator says can result in unnecessary and 

unreasonable expenses.

Page 40 GAO-07-401 Title Insurance
In the states we visited, we found that regulators did not assess title 

agents’ costs to determine whether they were in line with premium rates; 

had made only limited efforts to oversee title agents (including ABAs 

involving insurers and agents); and, until recently, had taken few actions 

against alleged violations of antikickback laws. In part, this situation has 

resulted from a lack of resources and limited coordination among different 

regulators within states. On the federal level, authority for alleged 

violations of section 8 of RESPA, including those involving increasingly 

complex ABAs, is limited to seeking injunctive relief.28 Some state 

regulators expressed frustration with HUD’s level of responsiveness to 

their requests for help with enforcement, and some industry officials said

that RESPA rules regarding ABAs and referral fees need to be clarified.

Industry and government stakeholders have proposed several regulatory 

changes, including RESPA reform, strengthened regulation of agents, a 

competitor right of action with no monetary penalty, and alternative title

insurance models.29

Because consumers can do little to influence the price of title insurance, 

they depend on regulators to protect buyers from, for example, excessive 

premium rates. As they do with most lines of insurance, such as propertycasualty coverage, regulators seek to ensure that title insurance premium 

rates are representative of the underlying risks and costs associated with

the policies that are issued. In reviewing insurance rates, regulators 

generally focus on confirming that insurers’ projections of their expected

losses on claims are accurate, because for virtually all lines of insurance, 

the majority of consumers’ premiums go to pay such losses. For propertycasualty insurance in 2005, for example, 73 percent of total premiums 

were used to cover losses. For title insurers, however, only 5 percent of 

title insurance premiums went to cover losses (see fig. 11), while more 

than 70 percent went to title agents. 

Limited State and 

Federal Oversight of 

the Title Insurance 

Industry Has Resulted 

in Proposals for 

Change 

Regulators Do Not Fully 

Assess Title Agents’ Costs 

during Rate Reviews 

 28RESPA does provide criminal sanctions for violations of section 8, a fine of up to $10,000 

or up to 1 year in prison. However, according to HUD officials, such sanctions are rarely 

used, in part because they require prosecutions to be conducted by U.S. attorneys from the 

Department of Justice. 

29A competitor right of action would allow industry participants to seek to stop activities of 

their competitors that they think violate the law. 

Page 41 GAO-07-401 Title Insurance
Figure 11: Title Industry Costs as a Percentage of Premiums Written, 2005

5%

25% Other expensesa

70%

Source: GAO analysis of NAIC data.

Loss and loss adjustment expenses

Paid to or retained by agents

a

The “Other expenses” category includes salaries, rent, and equipment costs, among other things. 

Despite this difference, few regulators review the costs that title agents 

incur to determine whether they are in line with the prices charged. In 

fact, in the majority of states, agents’ costs for search and examination 

services are not considered part of the premium and, thus, receive no

review by regulators. Therefore, title agents charge separately for their 

search and examination services, yet they receive about the same 

percentage of the premium as agents in states where these costs are 

included in the premium. In our six sample states, one regulator did not 

regulate premium rates for title insurance at all, and one state sold title 

insurance through a state-run program that did not regulate title search 

and examination costs. In the remaining four states, agents’ search and

examination costs were considered part of the premium, but regulators in

only one of those states regularly reviewed title agents’ costs as part of the 

rate review process. The other three regulators saw the amount retained 

by the agents as a cost to the insurer that they would review as 

justification for insurers’ premium rates. However, these states did not go 

beyond the insurer to review the agents’ costs. 

Furthermore, only two of the six regulators we reviewed collected 

financial and operational data on title agents, and regulatory officials in 

both those states said that the data that they currently collect were 

Page 42 GAO-07-401 Title Insurance
insufficient to analyze the appropriateness of current premium rates. For 

example, while officials from the California insurance regulator have 

concluded that a lack of competition exists and that premium rates are 

excessive, they have determined that they would need to collect a 

significant amount of additional information before they could assess the 

extent of overpricing. In July 2006, the officials proposed an extensive plan 

for collecting these data that involved gathering information at the 

individual transaction level. Similarly, the Texas insurance regulator has 

been collecting financial data on title agents, but officials there have

concluded that these data, which are not organized by functional 

categories, are insufficient for determining the extent of potentially 

excessive costs. Because costs incurred by title agents receive such 

limited review, most state insurance regulators are limited in their ability 

to assess whether the amounts that consumers are charged for title 

insurance reflect the costs they are intended to cover. Appendix II 

describes the types of information that would be helpful in assessing title 

agents’ costs and operations. 

States Conduct Only

Limited Regulation and 

Oversight of Title Agents 

Some aspects of agent regulation, such as licensing, varied across our 

sample states, while other aspects, such as capitalization and education 

requirements, were minimal. Of our six sample states, four required agents

to register or obtain a license. Iowa had no title agents, and New York had 

no licensing or registration requirements.30 Furthermore, state regulators 

rarely audited agents, and the audits that were done were usually limited 

to examining only accounts that title agents use to hold customers’ money, 

known as escrow accounts. Audits of operating accounts were 

uncommon, although some industry participants said that these accounts 

were a source of agent defalcations.31 Table 2 summarizes some aspects of 

title agent regulation in our sample states. 

 30Because the sale of title insurance within Iowa—one of our sample states—is prohibited, 

attorneys and abstractors do title work. 

31Agent defalcation occurs when an agent misappropriates funds and fails to pay off a prior

mortgage. 

Page 43 GAO-07-401 Title Insurance
Table 2: Regulation of Title Insurance Agents in Six Sample States 

State State licensing 

Continuing

education 

Capitalization 

requirements State audits Insurer oversight 

Proposed

regulations 

California Yes No Net worth of $75,000 

to $400,000 

Quarterly 

financial 

statements 

Oversees escrow 

procedures and

approves agent 

bonding 

Yes 

Colorado Yes No $10,000 With cause Compliance with

title insurance laws, 

report fraud or late 

premium payments 

Yes 

Illinois Yes (registration

only) 

No No With cause Can withdraw 

agent registration. 

No 

Iowa Must have law 

licensea

No No Attorneys are

subject to state

audits. 

Participating 

attorneys are 

subject to relevant 

state law. 

N/A 

New York No No No No General Agency 

Law governs 

Yes 

Texas Yes Yes No Annual Report failure to

provide annual

audit report 

Plans to call for 

more agent data 

Source: GAO analysis of state insurance laws and regulations. 

a

Attorneys and abstractors, rather than title agents, perform title work in Iowa. 

Moreover, few states we visited require strong insurer oversight of agents.

The nature of such oversight is usually negotiated between the insurer and 

the agent and defined by contract. Typically, the insurers sign up agents 

based on the quality of their service and their reputation in a certain area

and audit their escrow accounts every 18 to 36 months. Industry 

participants told us that contractual stipulations and questions of unfair 

competitive practices were among the reasons that prevented insurers 

from looking into independent agents’ operating accounts. When we asked 

the major title insurers that we spoke with for information on title agents’ 

costs, they said that they did not collect data from title agents in a manner 

that would allow for an analysis of costs and profitability and, thus, could 

not provide us with such information For example, these insurers said that 

while they reviewed the records of agencies that wrote policies for them, 

contracts with the agencies generally limited such reviews to escrow 

accounts and policy records—that is, only enough review to ensure that 

the insurer had received its share of premiums for the policies issued, but 

not enough review to evaluate the components of agent costs. 

Page 44 GAO-07-401 Title Insurance
Although insurers may not have access to all of the data they need from 

independent title agents (1) that write for several companies and (2) that 

do not want insurers to see financial information related to their entire 

business, the situation with affiliated title agents is generally different. In

affiliated arrangements, the insurer has an ownership interest in the title 

agent and seemingly would have access to the agent’s financial records—

especially in cases where the insurer has a controlling interest in the agent 

and may be required to consolidate its affiliated agent’s financial 

statements with its own. According to regulators, however, the industry 

has been resistant to calls for more extensive data collection because of 

the potential cost burden on the insurers and their agents. 

Regulators in California and Colorado have recently implemented or plan 

to implement stronger regulations for title agents, including more stringent 

qualifying examinations, higher capitalization requirements, criteria to 

identify sham business arrangements, and more detailed data calls 

focusing on the costs of providing title insurance. The regulators said that 

these stronger regulations would be key to preventing illegal actions by 

agents by eliminating both bad actors and questionable practices in the 

title industry. 

Until recently, state regulators had done little to oversee ABAs. Although 

three of our six sample states have some type of restriction on the amount 

of business a title company can get from an affiliated source, enforcement 

of these laws appeared to be limited. In California, the laws specify that a

title company can get no more than 50 percent of its orders from a 

controlled source. In Colorado, until recently, an insurance licensee was 

prohibited from receiving more in aggregate premium from controlled 

business sources than from noncontrolled sources.32 However, one 

regulator told us that, until recently, it had not rigorously examined data 

from agents to verify their compliance with the percentage restrictions. 

Amid recent reports of enforcement actions taken by HUD and some 

states against allegedly inappropriate ABAs, some state insurance 

 32Under Colorado’s new law, ABAs are authorized provided that they meet conditions

similar to those in RESPA, and ABAs must be disclosed to the state division of insurance or 

real estate in connection with license applications. In addition, the divisions of insurance 

and real estate are to consult with one another to promulgate ABA rules, and to share

information derived from investigations of ABAs. New Colorado regulations include 

specific rate and fee rules; standards of conduct for title insurance entities, including

standards for ABAs; and rules regarding consumer protections.

Page 45 GAO-07-401 Title Insurance
regulators told us that they had begun looking into these increasingly 

popular arrangements. Regulatory officials told us that they had found 

various problems, including the level of compliance with mandatory 

percentage restrictions from controlled sources; the existence of 

potentially illegal referral fees and kickbacks among ABA owners; and title 

work performed at some agencies that might not qualify as “core” title 

work for which liability arises (such as the evaluation of title to determine 

insurability, clearance of underwriting objections, issuance of the title 

commitment and policy, and conducting the title search and closing). In 

Colorado and Minnesota, officials estimated that the number of ABAs had 

doubled in the past few years. Colorado regulatory officials attributed 

some of the growth to lax agent-licensing requirements, including low 

capitalization requirements and minimal prelicense testing. In contrast, 

California regulatory officials credited the relative lack of ABAs in their 

state to more stringent licensing and capitalization requirements. Agents in 

California, referred to as Underwritten Title Companies, must raise 

between $75,000 and $400,000 in capital to conduct business, depending 

on the number of documents recorded and filed with the local recorder’s

office. Furthermore, California has an extensive licensing process, 

including a review of the character, competency, and integrity of 

prospective owners; a financial assessment; and a review of the 

reasonableness of their business plan. As we previously noted, from 2003

to 2006, a growing number of federal and state investigations into ABAs 

alleged that these arrangements were being used to provide illegal referral 

fees and kickbacks. Colorado’s regulator has implemented stronger agent 

regulation, such as a stricter review of agents’ applications, mandated 

disclosure of any affiliated relationships, and higher capitalization and 

testing requirements. Regulatory officials said that these changes would 

help prevent future illegal actions by title agents, especially through the 

improper use of questionable ABAs. However, the more limited regulation

and oversight of title agents and ABAs in other states could provide 

greater opportunity for potentially illegal marketing and sales practices. 

States’ Enforcement of 

Antikickback and Referral 

Fee Provisions Was 

Uneven 

Kickbacks are generally illegal under both RESPA and most state 

insurance laws. Although the enforcement provisions of laws in five of the 

six states in our sample included suspension or revocation of agents’ 

licenses and monetary penalties, state regulators and others did not see 

these sanctions as effective deterrents against kickbacks. One state 

regulator and some industry participants expressed concern that title 

insurers and agents saw the fines simply as a cost of doing business, since 

these businesses stood to gain much more in market share and revenue 

through illegal kickbacks than they would lose in state-assessed monetary 

Page 46 GAO-07-401 Title Insurance
penalties. From 2003 to 2006, officials in states we reviewed settled with 

insurers for over $90 million in penalties for alleged referral fee violations. 

In comparison, in 2005 alone net earnings for the five biggest title insurers 

totaled almost $2 billion. In addition, at least one group of industry 

participants told us they took the fact that regulators had taken little 

action in the past to mean that they would not get caught if they engaged

in illegal activity. 

RESPA specifies that states—through their attorneys general or insurance 

commissioners—may bring actions to enjoin violations of section 8 of 

RESPA. In nearly all of our sample states, title insurance laws contain 

antikickback and referral fee provisions similar to those in RESPA. Also, 

although RESPA provides for injunctive action by state regulators, they 

have hesitated to use it and have only recently begun to look into RESPA 

section 8 violations. In one state, regulators concluded that they were 

prevented by state law from seeking injunctive relief under section 8 of 

RESPA because their only available court for complaints was an 

administrative one that did not satisfy RESPA requirements.33 Moreover, 

some state insurance regulators said that they had limited enforcement 

options against those that they identified as the major contributors to the 

kickback problem: real estate agents, mortgage brokers, and other real 

estate professionals. Even though receiving kickbacks is generally illegal 

under RESPA, some state regulators told us that they had no authority to 

go after these entities, which were regulated by other state agencies. 

Meanwhile, the regulators that oversee these real estate professionals have 

shown little interest in or knowledge of potential violations of their 

licensees. In California and, until recently, in Colorado, regulators said 

that inconsistencies in laws governing kickbacks for title insurers and 

other real estate professionals have made it difficult to pursue recipients 

of illegal kickbacks. Furthermore, some state officials told us that they 

received little response when they forwarded potential kickback cases to 

HUD investigators. A lack of consistent enforcement of antikickback and 

referral fee provisions by all relevant state regulators, as well as HUD, 

could limit the effectiveness of enforcement efforts. 

 33Actions pursuant to section 8 of RESPA may be brought in the United States district court

or in any other court of competent jurisdiction, with certain other limitations. HUD officials 

disputed the regulators’ assertion. 

Page 47 GAO-07-401 Title Insurance
Regulators at the state and federal levels told us that limited resources 

were available to address issues in title insurance markets. Title insurance 

is a relatively small line of insurance, and title insurers and agents often 

get even less than the usual limited market conduct scrutiny that state 

insurance regulators give other types of insurers.34 With little ongoing 

monitoring, selected regulators told us that their attention is drawn to 

problems largely through complaints from competitors. Complaints from 

consumers have been rare because, as we have discussed, they generally 

do not know enough about title insurance to know that they have a 

problem. 

Limited Resources and 

Lack of Coordination 

among Regulators within 

States May Limit the 

Effectiveness of 

Enforcement Efforts 

Furthermore, the many entities besides title insurers and agents that are 

involved in the marketing and sale of title insurance often have their own 

regulators. These entities include real estate agents, mortgage brokers, 

lenders, builders, and attorneys, all of which may be regulated by different

state departments. Our previous work has shown the benefits of 

coordinated enforcement efforts between state insurance regulators and 

other federal and state regulators in detecting and preventing illegal 

activity.35 According to some state officials’ comments, varying levels of 

cooperation exist among different state regulators, with some states 

demonstrating little or no cooperation and other states having more 

structured arrangements, such as a task force that might include the state 

insurance regulator, mortgage lending department, real estate commission, 

and law enforcement officials. Until a recent Colorado law was passed, 

however, these arrangements stopped short of being codified in legislation 

or regulation in any of our sample states. The previously mentioned task

force in Texas meets monthly to discuss current and potential fraud cases, 

and the regulators involved noted that it has helped them identify and 

investigate cases of which they would have otherwise been unaware. 

In our discussions with some noninsurance regulators, we observed that 

they had an apparently nominal understanding of violations of laws such 

as RESPA, and that they had taken few actions against their licensees for 

violations. Two of the state real estate regulators we spoke with, for 

 34Market conduct examinations are performed by state insurance commissioners, and they 

review agent-licensing issues, complaints, types of products sold by the company and 

agents, agent sales practices, proper rating, claims handling, and other market-related 

aspects of an insurer’s operation. See GAO-03-433. 

35GAO, Insurance Regulation: Scandal Highlights Need for Strengthened Regulatory

Oversight, GAO/GGD-00-198 (Washington, D.C.: Sept. 19, 2000). 

Page 48 GAO-07-401 Title Insurance
instance, said that they were not aware that referral fees were illegal under 

their state laws or under RESPA.36 Another real estate regulator said that 

the department did not maintain a complaint category for RESPA 

violations against licensees and, thus, could not provide us with the 

number of RESPA-specific complaints the agency had received. In 3 years,

this department had not revoked any licenses and could only identify one 

RESPA violation case in which licensees were publicly censured and fined. 

All of these actions were less than what was allowed by state law. 

One difficulty for state insurance regulators may be that the state laws and 

regulations for mortgage brokers, real estate agents, and others may differ 

from those for title insurers and agents, and these laws and regulations 

may not view referral fees in the same way, thus making interdepartmental 

enforcement difficult. For example, Illinois and New York real estate law 

contains no reference to referral fees related to settlement service 

providers, although the title insurance laws prohibit these fees. However, 

given the lack of coordination we noted among regulators in the same 

state, it is not surprising that different regulatory agencies were not aware 

of differences in the way state laws and regulations treat certain activities. 

Without greater communication and coordination among the various state 

regulators, some potentially illegal activities carried out by those involved 

in the sale and marketing of title insurance could go undiscovered and

uncorrected. 

HUD Officials Expressed 

Concern over Lack of 

Enforcement Authority for 

Violations of Section 8 of 

RESPA

The investigative actions HUD has taken have largely resulted in voluntary 

settlements without admission of wrongdoing by the involved parties. 

According to HUD officials, it is difficult to deter future violations without 

stronger enforcement authority, such as civil money penalties, because, as 

we previously mentioned, companies view small settlements as simply a 

cost of doing business. While HUD has obtained a number of voluntary 

settlements from 2003 to 2006, the average amount assessed by the 

department was approximately $302,000. During the same period, the 

combined net earnings of the five major national title insurers averaged 

about $1.6 billion each year. 

One particular area of possible section 8 violations about which HUD 

officials expressed concern was the difficulty of investigating complex 

 36During the course of our communication with these regulators, we informed them that 

referral fees were generally illegal under the state law in question and under RESPA. 

Page 49 GAO-07-401 Title Insurance
ABA relationships. RESPA provides an exemption to the antikickback 

provision for compensation for goods or services actually provided. 

However, HUD officials told us that it was often difficult to establish what 

type of and how much work an entity actually did. In the past, the most 

common type of ABA was an entity, such as a real estate broker, that 

owned another entity, such as a title agent. Recently, the arrangements 

have begun to involve three or more entities, making it difficult to trace 

the flow of money among entities and the responsibilities of each entity.

HUD’s enforcement mechanism is also complaint-driven, but, as we 

previously noted, most consumers are not well-informed enough to bring 

complaints. Thus, violations could exist that HUD would not know about. 

HUD has few staff focused on RESPA issues, although their number has 

increased from 5 full-time employees in 2001 to more than 19 in 2006. 

According to other regulators, these employees are generally limited to 

responding to some complaints and pursuing a few large cases. Recently,

HUD officials responsible for enforcing RESPA have begun training 

employees in HUD’s Office of the Inspector General on RESPA issues. The 

officials said that they have received some forwarded cases as a result of 

the training. In addition to staff specifically assigned to RESPA issues, 

resources in other parts of HUD, such as the Office of the General 

Counsel, also provide support, according to HUD officials. HUD also 

spends $500,000 per year on an investigative services contract to assist 

RESPA enforcement efforts. HUD tracks cases of alleged RESPA 

violations along with their disposition, staff assigned, closing date, and 

settlement, but we did not obtain this information by the time this report 

went to print. 

Some state regulators expressed frustration with HUD’s level of 

responsiveness, saying that the agency did not always follow up with them 

on forwarded cases, potentially limiting the success of investigative

efforts. State regulators told us that they looked to HUD to enforce 

kickback provisions beyond what they had concluded was allowed by 

state insurance laws—for example, against mortgage brokers, real estate

agents, and others that state insurance regulators do not oversee. Yet HUD 

officials and state regulators told us that there was no formal plan for 

coordinating with states, and that cooperation, where it existed, relied on 

requests and informal relationships. 

HUD officials cited several possible reasons for not communicating the 

results of forwarded cases to the states. Among these reasons were state 

and federal jurisdictional issues, constrained resources, and complaintdriven enforcement that limited HUD’s scope. As we mentioned, our 

Page 50 GAO-07-401 Title Insurance
previous work has shown the benefits of coordinated enforcement efforts 

between state insurance regulators and other federal and state regulators 

to detect and prevent illegal activity. A September 2000 report 

recommended that state insurance regulators improve information sharing 

by developing mechanisms for routinely obtaining data from other 

regulators and implementing policies and procedures for sharing 

regulatory concerns with other state insurance departments.37

Some industry officials also said that the rules under RESPA were not 

always clear and that HUD had not been responsive in answering their 

inquiries, potentially resulting in activities that HUD later deemed to be 

illegal. For example, in the case of captive reinsurance, two large 

underwriters told us that they had never received clear answers from HUD 

to inquiries about the legality of such arrangements, and that they entered 

into them as a result of competitive pressures. Eventually, these 

underwriters ended the arrangements after federal regulators investigated

and deemed them improper. As a result, these underwriters and other 

entities paid over $66 million in settlements with states and HUD. Some 

industry participants, including HUD’s former general counsel, have 

suggested that HUD clarify RESPA by instituting a no-action letter process 

similar to the one that the SEC uses to address industry questions on 

potential activities and to the process that HUD uses in its Interstate Land 

Sales Program.38 Although clarifying regulations can provide benefits, 

without greater enforcement authority and more coordination with state 

regulators, HUD’s effectiveness at deterring, uncovering, and stopping 

potentially illegal title insurance activities may be limited. 

HUD, State Regulators, 

and Industry Stakeholders 

Have Developed Proposals 

for Improving the 

Regulation and Sale of 

Title Insurance 

With knowledge gained from their recent investigations into the title 

insurance industry, and in line with their mission to increase access to 

affordable housing, HUD has developed a two-pronged approach to 

regulatory changes. First, HUD plans to propose reforms to the regulations 

that govern RESPA. Agency officials said that the reforms will help 

consumers shop for settlement services, and that, hopefully, consumerdriven competition will put downward pressure on prices. However, 

agency officials have not yet made public the specifics of these reforms. 

 37GAO/GGD-00-198. 

38SEC’s no-action letter process allows an individual or entity that is not certain whether a

particular product, service, or action would constitute a violation of the federal securities 

law to request a “no-action” letter from the SEC staff. 

Page 51 GAO-07-401 Title Insurance
Second, HUD plans to seek substantial authority to levy civil money 

penalties that it expects will deter future violations of section 8 of RESPA. 

HUD officials said that having the authority to levy civil money penalties 

would greatly enhance their RESPA enforcement efforts. HUD’s obtaining 

civil money penalty authority in section 8 of RESPA, however, would 

require a legislative change. 

Some state regulators also have proposed changes in oversight of the title 

insurance industry. Regulatory officials found that weak licensing 

regulations may have contributed to problems in the industry, and that a 

lack of data on title agents’ costs hindered their ability to analyze prices 

paid by consumers and to ensure such prices were not excessive. As a 

result, regulators have proposed the following changes: 

• In Colorado, state regulators have made changes that are primarily aimed 

at making the identification and, thus, the elimination of improper ABAs 

easier—for example, through mandatory disclosure of ownership 

structures on agent applications and higher capitalization requirements. At 

least one industry participant has welcomed the changes, which it said will 

help level the playing field for independent agents. 

• In California, state regulators have concluded that premium rates are 

excessive and have proposed premium rate rollbacks derived from a 

detailed evaluation of costs. 

• In Texas, state regulators are attempting to collect more detailed 

information on agent costs, shifting their emphasis to comprehensive data

on functional categories that would allow them to more easily identify 

excess costs and illegal kickbacks. 

In addition, the NAIC Title Working Group is looking at modifications to 

the model laws in an effort to align referral fee provisions with those of 

RESPA and enhance state regulators’ enforcement authority. 

Finally, some industry officials have said that state and federal regulators

either did not have the ability or lacked the will to address violations, 

which the officials said was the fault of only some in the industry. Other 

officials said that they had concluded that the industry would be better off

policing itself, and some underwriters proposed giving insurers the right to

seek private injunctive relief against competitors suspected of engaging in 

illegal activities, but with no monetary award. One underwriter official 

said such self-policing by the industry would help government 

enforcement and maintain honesty among industry participants. However, 

Page 52 GAO-07-401 Title Insurance
it was not clear whether such actions could be used punitively or as a way 

to stifle competition. 

Some industry stakeholders, however, see the current model of selling and 

marketing title insurance as irretrievably broken and have put forth two 

alternative title insurance models designed to benefit and protect 

consumers through lower prices and government intervention. The first 

alternative model would require lenders to pay for title insurance, on the 

theory that as regular purchasers of title insurance, lenders would be 

better informed and could potentially use their market power to obtain 

lower prices. However, some fear that this model would make the process 

less transparent, and that lenders would not pass on any cost savings. The 

second alternative model would be a system like Iowa’s, with state-run 

title underwriters. But it is not clear that this system would make the 

necessary changes to the current model or that it would save consumers 

money. For example, although title underwriters are barred from selling 

title insurance in Iowa, nothing prevents consumers from choosing to 

purchase it from them out of state, and the underwriters end up providing 

title insurance to about half of the market. Furthermore, while premium 

rates for Iowa Title Guaranty might be lower, although not the lowest, than 

rates in many other states, the total costs that consumers pay for title 

searches, examinations, and clearing of any title problems might not differ 

substantially. In Bankrate.com’s survey of closing costs, Iowa’s total costs 

were about the same as those in Maryland, Nebraska, South Dakota, 

Washington State, and West Virginia, where private title underwriters are 

free to do business. 

Title insurance can provide real benefits to consumers and lenders by 

protecting them from undiscovered claims against property that they are 

buying or selling. However, multiple characteristics of current title 

insurance markets, as well as allegedly illegal activities by a number of 

those involved in the marketing of title insurance, suggest that normal 

competitive forces may not be working properly, raising questions about 

the prices consumers are paying. Compounding this concern is the 

apparently very limited role that most consumers play in the selection of a 

title insurer or agent, and the fact that consumers must purchase title 

insurance to complete a real estate purchase or mortgage transaction. This 

puts consumers in a potentially vulnerable situation where, to a great 

extent, they have little or no influence over the price of title insurance but,

at the same time, they have little choice but to purchase that insurance. 

Furthermore, federal and state regulators have identified a number of 

recent allegedly illegal activities related to the marketing and sale of title 

Conclusions 

Page 53 GAO-07-401 Title Insurance
insurance, which suggests that some in the title insurance industry are 

taking advantage of consumers’ vulnerability. To begin to better protect 

consumers, improvements need to be made in at least three different 

areas. 

First, price competition between title insurers and between agents, from 

which consumers would benefit, needs to be encouraged. Educating 

consumers about title insurance is critical to achieving this objective. 

Some state regulators have begun to encourage competition by attempting

to educate consumers and improve transparency by publicizing premium 

rate information on their Web sites. While HUD’s existing home-buyer 

information booklet also provides some useful information on buying a 

home, the information on title agent ABAs and available title insurance 

discounts is outdated and fails to provide sufficient detail. As a result, 

home owners may not be making informed title insurance purchases. 

Moreover, although some in the industry complain about ambiguity in the 

regulations concerning referral fees associated with ABAs, their use has 

continued to grow even while the extent to which any realized benefits 

from such arrangements are passed along to consumers is unknown. In 

addition, these arrangements can create potential conflicts of interest for 

the real estate and lending professionals involved that may disadvantage

consumers. 

Second, to ensure that consumers are paying reasonable prices for title 

insurance, more detailed analysis is needed on the relationship between

the prices consumers pay and the underlying costs incurred by title 

insurers and, especially, title agents. Because of the key role played by title 

agents, such analysis will not be possible until state regulators collect and 

analyze data on those agents’ costs and operations, including those 

operating as ABAs. 

Third, to ensure that consumers are not taken advantage of because of 

their limited role in the selection of a title insurer or agent, more needs to

be done to detect and deter potentially illegal practices in the marketing 

and sale of title insurance, particularly among title agents. HUD and 

several state regulators have already begun to take steps in this area, but 

these efforts often face challenges, such as HUD’s limited enforcement 

authority, statutory limitations of RESPA, potentially confusing 

regulations, and a lack of coordination among multiple regulators. 

Increased regulatory scrutiny of the increasing number of complex ABAs 

appears to be particularly important because although only a few state 

regulators have looked at such arrangements in detail, those that have

looked at this issue have discovered potentially illegal activities. Because 

Page 54 GAO-07-401 Title Insurance
entities other than insurance companies are integrally involved in these 

transactions, identifying approaches to increase cooperation among HUD, 

state insurance, real estate, and other regulators in the oversight of title 

insurance sales and marketing practices is also critical. Ultimately, 

because of the involvement of both federal and state regulators, including

multiple regulators at the state-level, effective regulatory improvements 

will be a challenge and will require a coordinated effort among all 

involved. 

Congress can also play a role in improving consumers’ position in the title 

insurance market by reevaluating certain aspects of RESPA. For example, 

HUD currently lacks the authority to assess civil money penalties for 

violations of section 8 of RESPA, generally forcing HUD to rely on 

voluntary settlements, which can be seen by some in the title insurance 

industry as simply a cost of doing business. In addition, RESPA dictates 

when and under what circumstances HUD’s home-buyer information 

booklet is to be distributed to prospective buyers and borrowers. 

Revisiting RESPA to ensure that consumers receive this information as 

soon as possible when they are considering any type of mortgage 

transaction, not just when purchasing real estate, could be beneficial. 

As part of congressional oversight of HUD’s ability to effectively deter 

violations of RESPA related to the marketing and sale of title insurance, 

Congress should consider exploring whether modifications are needed to

RESPA, including providing HUD with increased enforcement authority 

for section 8 RESPA violations, such as the ability to levy civil money 

penalties. Congress also should consider exploring the costs and benefits

of other changes to enhance consumers’ ability to make informed 

decision, such as earlier delivery of HUD’s home-buyer information 

booklet—perhaps at a real estate agent’s first substantive contact with a 

prospective home buyer—and a requirement that the booklet be 

distributed with all types of consumer mortgage transactions, including

refinancings. 

We are recommending that HUD take the following two actions, as 

appropriate. The Secretary of HUD should take action to (1) protect 

consumers from illegal title insurance marketing practices and (2) improve 

consumers’ ability to comparison shop for title insurance. Among the 

actions they should consider are the following: 

Matters for 

Congressional 

Consideration 

Recommendations for 

Executive Action 

Page 55 GAO-07-401 Title Insurance
• expanding the sections of the home-buyer information booklet on title 

agent ABAs and available title insurance discounts; 

• evaluating the costs and benefits to consumers of title agents’ operating as 

ABAs; 

• clarifying regulations concerning referral fees and ABAs; and 

• developing a more formalized coordination plan with state insurance, real

estate, and mortgage banking regulators on RESPA enforcement efforts. 

Likewise, we are recommending that state insurance regulators, working

through NAIC where appropriate, take the following two actions. State 

regulators should take action to (1) detect and deter inappropriate 

practices in the marketing and sale of title insurance, particularly among 

title agents, and (2) increase consumers’ ability to shop for title insurance 

based on price. Among the actions they should consider are the following: 

• strengthening the regulation of title agents through means such as 

establishing meaningful requirements for capitalization, licensing, and 

continuing education; 

• improving the oversight of title agents, including those operating as ABAs, 

through means such as more detailed audits and the collection of data that 

would allow in-depth analyses of agents’ costs and revenues;

• increasing the transparency of title insurance prices to consumers, which 

could include evaluating the competitive benefits of using state or industry 

Web sites to publicize complete title insurance price information, 

including amounts charged by title agents; and

• identifying approaches to increase cooperation among state insurance, 

real estate, and other regulators in the oversight of title insurance sales 

and marketing practices. 

We requested comments on a draft of this report from HUD and NAIC. We 

received written comments from the Assistant Secretary for Housing of 

HUD and the Executive Vice President of NAIC. Their letters are 

summarized below and reprinted in appendixes III and IV, respectively. 

The Assistant Secretary for Housing at HUD generally agreed with our 

findings, conclusions, and recommendations. Specifically, he indicated

that the report accurately assessed the issues that adversely affect 

Agency Comments 

and Our Evaluation 

Page 56 GAO-07-401 Title Insurance
consumers in the title insurance market. He also acknowledged the 

importance of protecting consumers and improving their ability to shop 

for title insurance. In response to our recommendation to expand the 

sections of the home-buyer information booklet on ABAs and discounts, 

he noted the importance of home-buyer education and amending the 

home-buyer’s booklet to include this information. Addressing our 

recommendation to evaluate the costs and benefits of ABAs, he said that 

while ABAs are currently legal, HUD is in the process of evaluating various 

ABA structures to ensure they operate as Congress intended. We also 

recommended that HUD clarify regulations about referral fees and ABAs. 

The Assistant Secretary stated that HUD will continue its efforts to clarify 

existing guidelines, as well as develop new guidelines, to address practices 

that negatively impact consumers. Furthermore, he generally agreed with 

our recommendation for greater coordination with state regulators, noting 

that such coordination is necessary and pointing out past instances of 

HUD coordination with state regulators on RESPA enforcement that have 

resulted in successful outcomes. Lastly, he emphasized the ongoing 

challenge of RESPA enforcement without civil money penalty authority, 

stating that consumers would benefit if such authority were granted to 

HUD. 

The Executive Vice President of NAIC agreed that our report identified 

concerns in the area of consumer protection. She also said that our 

recommendations are worthy of exploration, and that NAIC would 

continue to work to improve consumer education, consumer protections, 

and price transparency in the title insurance market. 

We also received separate technical comments from staff at HUD and 

NAIC. We have incorporated their comments into the report, as 

appropriate.

As agreed with your office, unless you publicly announce its contents 

earlier, we plan no further distribution of this report until 30 days from the 

report date. At that time, we will send copies to the Chairman, House 

Committee on Financial Services, and the Chairman and Ranking 

Member, Senate Committee on Banking, Housing, and Urban 

Development. We will also send copies to the Secretary of Housing and 

Urban Development, the President of the National Association of 

Insurance Commissioners, and each of the state insurance commissioners. 

We will make copies available to others upon request. The report will also 

be available at no charge on our Web site at http://www.gao.gov. 

Page 57 GAO-07-401 Title Insurance
Please contact me at (202) 512-8678 or williamso@gao.gov if you or your 

staff have any questions about this report. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. Key contributors to this report are listed in appendix V. 

Sincerely yours, 

Orice M. Williams 

Director, Financial Markets 

and Community Investment 

Page 58 GAO-07-401 Title Insurance
Appendix I: Objectives, Scope, and Appendix I: Objectives, Scope, and Methodology 

Methodology 

We previously provided a report and testimony identifying characteristics

of current title insurance markets that merited additional study, including 

the extent to which title insurance premium rates reflect underlying costs 

and the extent of state oversight of title agents and other real estate 

professionals.1

 This report focuses on issues related to (1) the 

characteristics of title insurance markets across states, (2) the factors that 

raise questions about prices and competition in the industry, and (3) the 

current regulatory environment and planned regulatory changes. 

Because of our awareness that title insurance regulation varies 

considerably from state to state, we chose six states in which to perform a 

detailed review of their laws, and regulatory and market practices. These 

states were California, Colorado, Illinois, Iowa, New York, and Texas. We 

chose these states to obtain a broad variety of state title insurance activity

across the following dimensions: 

• Proportion of the premiums written nationwide.

• Differences in the process of purchasing title insurance and the real estate

transaction, including the relative importance of attorneys and alternative

systems for title insurance. 

• Domiciling of the largest national insurers and larger regional insurers. 

• Varying rate-setting regimes and total premiums. 

• The existence of ongoing or past Department of Housing and Urban 

Development (HUD) investigations in the state.

• Different combinations of premium rates, annual home sales, and ratesetting regimes. 

• The activity of known proactive regulators in some states. 

Except where noted, our analysis is limited to these states. We used the

information obtained in the states to address each of our objectives, in

addition to other work detailed in the following text. 

 1

GAO, Title Insurance: Preliminary Views and Issues for Further Study, GAO-06-568 

(Washington, D.C.: Apr. 24, 2006); and Title Insurance: Preliminary Views and Issues for

Further Study, GAO-06-569T (Washington, D.C.: Apr. 24, 2006).

Page 59 GAO-07-401 Title Insurance
Appendix I: Objectives, Scope, and 

Methodology 

To gain an overall understanding of the characteristics of national and 

local title insurance markets, we reviewed available studies. These 

included the study on the California title insurance market (as well as 

numerous criticisms of that study) and recent studies conducted on behalf 

of the Fidelity National Title Group, Inc., and the Real Estate Settlement 

Providers Council (RESPRO).2

 We discussed the studies’ results with the 

authors and raised questions about their methodology and conclusions to 

further broaden our knowledge of the varying approaches in analyzing title 

insurance markets. 

To better understand the effect consumers have on the price and selection 

of title insurance, we obtained information from title insurers, title agents, 

and state title industry associations about typical consumer behavior in 

the title insurance transaction. To deepen our understanding of the 

dynamics of the industry and current practices and issues within the title 

insurance industry that affect consumers, we gathered views from a 

variety of national organizations whose members are involved in the 

marketing or sale of title insurance or related activities. These

organizations included the American Land Title Association (ALTA), 

RESPRO, the National Association of Realtors, the Mortgage Bankers 

Association of America, the American Bar Association, the National 

Association of Home Builders, and the National Association of Mortgage 

Brokers. 

To better understand the relationship between premium rates and 

underlying costs, we discussed these issues with insurers, agents, and title 

industry associations. We attempted to obtain cost data from agents and 

insurers, but they were not able to provide us with data that would allow 

analysis of agent costs. In some states, we toured title plant facilities and 

observed the title search and examination process to broaden our analysis 

of underlying title insurance costs. To gain a better understanding of how 

title insurance premiums are shared between insurance companies and 

agents, we reviewed annual financial data collected by the National 

Association of Insurance Commissioners (NAIC) from title insurance 

companies and, to some extent, data collected by the Texas Department of 

 2

Birny Birnbaum, Report to the California Insurance Commissioner: An Analysis of 

Competition in the California Title Insurance and Escrow Industry (Austin, TX:

December 2005); Donald Martin, PhD, and Richard Ludwick, Jr., PhD, Affiliated Business 

Arrangements and Their Effects on Residential Real Estate Settlement Costs: An

Economic Analysis (Washington, D.C.: October 2006); and Gregory Vistnes, An Economic 

Analysis of Competition in the Title Insurance Industry (Washington, D.C.: March 2006). 

Page 60 GAO-07-401 Title Insurance
Appendix I: Objectives, Scope, and 

Methodology 

Insurance, the California Department of Insurance, and ALTA.3 We 

analyzed these data to deepen our understanding of title insurer and agent

costs and revenues. We also consulted other publicly available financial 

information on title insurers and agents and spoke with agents. To 

determine how insurers account for premiums, we also looked at financial 

data filed with the Securities and Exchange Commission and spoke with 

officials from three of the largest title insurance underwriters. 

To assess the current state and federal regulatory environment, we 

reviewed laws and regulations, and interviewed key regulators. To 

determine the role that states play in overseeing the various parties 

involved in the title insurance industry, we reviewed laws and regulations 

governing title insurance, real estate, and mortgage banking in six selected

states. We also spoke with insurance, banking, mortgage, and real estate 

regulators in each state. To obtain an understanding of the federal 

oversight role in the title insurance market, we interviewed officials from 

HUD and reviewed relevant laws and regulations. We also discussed these 

issues with officials at the Federal National Mortgage Association and the 

Federal Home Loan and Mortgage Corporation to better understand the

relationship between the secondary mortgage market and title insurance.

Furthermore, we interviewed staff and state regulators working with NAIC 

to get their views on the industry and to obtain information on the 

activities of their Title Insurance Working Group. 

We performed our work in Washington, D.C.; Chicago, Illinois; and 

selected sample states between February 2006 and March 2007 in 

accordance with generally accepted government auditing standards. 

 3

NAIC is a voluntary organization of the chief insurance regulatory officials of the 50 states, 

the District of Columbia, and the four U.S. territories. NAIC assists state insurance

regulators by providing guidance, model (or recommended) laws and guidelines, and 

information-sharing tools. ALTA is a national trade association for title insurers and agents, 

but its members also may include attorneys, builders, developers, lenders, and real estate 

brokers. 

Page 61 GAO-07-401 Title Insurance
Appendix II: Potential Approach to Better 

Understand Title Agents’ Costs and How Appendix II: Potential Approach to Better These Costs Relate to Insurance Premiums 

Understand Title Agents’ Costs and How 

These Costs Relate to Insurance Premiums 

Understanding title agents’ costs and how these costs relate to title 

insurance premiums that consumers pay is important because title agents 

do or coordinate most of the work necessary for issuing title insurance 

policies, and they retain most of the premium. Understanding these costs 

would require state insurance regulators to gather and analyze financial 

data on title agents. The list below illustrates the types of data that might 

be gathered and analyzed. This would be a multistep process and could

involve detailed analysis of some title agents, such as those that look quite 

different financially from group (such as county or statewide) averages. 

Reasonable explanation for such differences could be informative of 

agency costs, while the absence of reasonable explanation could raise 

questions about the legitimacy of such costs. 

We identified the following information on affiliated agents and direct 

operations that could be requested from insurers: 

1. A complete list of underwriters’ affiliated title agents and title service 

companies that would include the company name and address and the 

year acquired or established by the underwriter. 

2. Financial data on each affiliate that would include balance sheets and 

statements of changes in owners’ equity. 

3. Revenue data that would include title premium revenues and

production fees earned from others (e.g., search and examination, 

closing, and recording). 

4. Title premium revenues and policies written that would be broken out 

between residential and commercial. 

5. Personnel cost data that would include salaries, commissions, 

bonuses, benefits, and full-time equivalent employees, by function. 

6. Other personnel data that would include average salaries, bonuses and 

benefits, and brief descriptions of any incentive pay systems, by job 

type and function. 

7. Five years of other expense data that would include search and 

examination fees paid to contractors, advertising, entertainment, plant 

maintenance, rent, office supplies, and legal fees and settlements. 

8. Expenses allocated to and from the underwriter. 

Page 62 GAO-07-401 Title Insurance
Appendix II: Potential Approach to Better 

Understand Title Agents’ Costs and How

These Costs Relate to Insurance Premiums 

9. For each affiliated title service company, the names of the 10 largest 

clients. 

10. For each subsidiary of the underwriter, the names of any other 

underwriters, escrow companies, realtors, builders, developers, 

mortgage brokers, lenders, or other entities in the title, real estate, or 

mortgage industry 

• that have ownership interests in the subsidiary, 

• in which the subsidiary has an ownership interest, or 

• that are vendors of the subsidiary and owned by subsidiary 

management. 

Likewise, we identified the following information on independent title 

agents that could be requested from insurers: 

1. The number of independent agents, by state. 

2. The number of offices of each independent agent, by state. 

3. Each agent’s title premiums written for the underwriter as a 

percentage of the agent’s total title premiums written. 

4. Premiums written by each agent for this underwriter, by state.

5. Revenue data that would include title premium revenues and

production fees earned from others (e.g., search and examination, 

closing, and recording). 

6. Expense data that would include employee and owner salaries, 

commissions, bonuses, and benefits; director fees; search and

examination fees paid to contractors; advertising; entertainment; plant 

maintenance; rent; office supplies; legal fees and settlements; and 

claim losses. 

Page 63 GAO-07-401 Title Insurance
Appendix III: Comments from the Department Appendix III: Comments from the of Housing and Urban Development 

Department of Housing and Urban 

Development 

Page 64 GAO-07-401 Title Insurance
Appendix III: Comments from the Department 

of Housing and Urban Development 

Page 65 GAO-07-401 Title Insurance
Appendix III: Comments from the Department 

of Housing and Urban Development 

Page 66 GAO-07-401 Title Insurance
Appendix IV: Comments from the National Association of Appendix IVInsurance Commissioners : Comments from the National 

Association of Insurance Commissioners 

 Page 67 GAO-07-401 Title Insurance
Appendix V: 

A

GAO Contact and Staff 

cknowledgments 

Page 68 GAO-07-401 

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact Orice Williams, (202) 512-8678, williamso@gao.gov

In addition to the contact person named above, Lawrence Cluff, Assistant 

Director; Patrick Ward; Tania Calhoun; Emily Chalmers; Jay Cherlow; 

Nina Horowitz; Thomas McCool; Marc Molino; Donald Porteous; Carl 

Ramirez; and Melvin Thomas made key contributions to this report. 

Title Insurance

Staff 

Acknowledgments 

(250298) 
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