Why Tony Soprano Wants a Job in the Title Industry
Life is risky. That’s why we have insurance. We buy auto, home and life insurance because even though we’re loath to admit it, we know we have a decent chance of crashing the car, burning down the house, and, well, kicking the bucket. (Ok, so we more than a decent chance on that last one.)
It’s possible you will never make a claim on a particular policy, though. Your monthly premiums may just disappear into the ether. You might make it all 77.3 years without so much as getting into a fender-bender. You might live a hundred illness-free years and die quickly and gracefully in your sleep. Even allowing for these possibilities, however, most of us get auto and health insurance. We love to gripe about paying premiums, but in general, we feel like we’re paying for something worthwhile.
Then there’s title insurance.
First of all what is title insurance? I hadn’t heard of it until I bought house last summer. In essence, title insurance protects a homebuyer if he or she buys a house from a crook. You see, back in the day, swindlers would sell houses they didn’t own to unsuspecting buyers. The swindler would leave town a rich man; the new homeowners would be out a lot money and not have a house to show for it. In a case like that, you’d be glad you had title insurance. The premium would be well worth it.
As it happens, that almost never happens anymore. While there are certainly risks to homeownership, accidentally buying a house from a crook is very far down the list of possibilities. Yet every aspiring homeowner must buy title insurance. Business writer Scott Woolley recently wrote an artilce for Forbes about the title industry under the headline: “Inside American’s Richest Insurance Racket.”
That racket rakes in $18 billion a year for a product that Wolley says is “outdated, largely uneeded—and protected by law.”
Technology has wiped out the need for a lot of products and services, but title insurance industry has survived the digital age intact. But not because it’s a valuable product. “[Title insurance] is far less necessary in these days of computerized records, online searches and rare instances of title fraud and hidden leins,” Wolley wrote in Forbes recently.
So how do title insurance firms survive when all they do is charge customers for a product they don’t need?
Woolley:
The title industry’s halcyon days owe much to antiquated state laws that thwart new competition, allow prices to soar despite declining costs and force almost every home buyer to pay for insurance that most of them will never need. In all but a handful of states, laws bar insurance giants in other fields, such as AIG or State Farm, from offering title insurance and undercutting incumbent’s process. It is also illegal for anyone to offer guarantees that provide the same protection as title insurance.[Emphasis mine.]
You’ve gotta to read this article. It’s muckraking journalism at its finest.
Comments
Hey Jeb, thanks for the undercover reporting -- hope you don't run into any more cats.
I used to have a very nice neighbor, Erin Toll, but she moved a couple years ago. And Geoff Hier is one of my good hockey friends, as well as being a great state employee.
But check out the interesting work they were doing with title insurance last spring
http://www.denverpost.com/business/ci_3881564
Posted by: lori reed | November 5, 2006 08:48 PM