An Overview of Title Insurance Regulation Steve Parton General Counsel Florida Office of Insurance Regulation June 4, 2009 Title Insurance Advisory Study Council Tallahassee, Florida

Overview of Presentation  Overview of Regulatory Structure  Regulatory Obstacles  Strategies to Improve Regulation

Statutory Changes Affecting Regulation  1965 – DOI First Given Regulatory Authority  1992 – 30% Premium Threshold Established for Title Insurance Companies  1999 – Legislature Freezes Premiums  2003 – Office of Insurance Regulation Founded  2007 – Legislature Amends Definition of “Premium”

Evolution of Premium Definition  F.L & – Defined Premium as a “Pure” Risk Premium.  F.L – Definition for Related Title Services  F.L – Definition of Primary Title Services  F.L – Title Services Redefined

Regulatory Structure  1991 – Bureau of Industry Coordination  Specialty Insurer Services  2003 – Present* --- Property & Casualty Section Section (5), F.S. – “Effective January 7, 2003, the rules of …the Department of Insurance that were in effect on January 6, 2003, shall become rules of … the Financial Services Commission … and shall remain in effect until specifically amended or repealed in the manner provided by law.” * Since 2003 Title Insurance Agents have been regulated by the Department of Financial Services.

Regulatory Issues 1) Non-Rule Policy 2) Regulatory Scheme

Question 1 Industry*: “Must a title agency charge reissue rates, rather than original rates, if a previous owner’s policy … is presented … prior to closing?” DOI**: “A title insurance agency must charge reissue rates …” *Excerpted from title insurer letter dated August 21, 2000 ** Excerpted from DOI response dated September 6, 2000

Question 2 Industry*: “Assuming the reissue rate is required … may the issuing agency nonetheless charge more than the reissue rate … ?” DOI**: “Yes, but disclosure is required” *Excerpted from title insurer letter dated August 21, 2000 ** Excerpted from DOI response dated September 6, 2000

Question 3 Industry*: “May an agency remit to its underwriter based on reissue rates even if the agency charges the consumer original rates …?” DOI**: “Yes, if the reissue rate applies and is disclosed on the closing statement.” *Excerpted from title insurer letter dated August 21, 2000 ** Excerpted from DOI response dated September 6, 2000

Question 4: Industry*: “May an agency charge more than the promulgated rate for an original owners or loan policy, if he discloses the promulgated rate on the settlement statement?” DOI**: “Yes; disclosure of the risk premium is required.” *Excerpted from title insurer letter dated August 21, 2000 ** Excerpted from DOI response dated September 6, 2000

Obstacles – Regulatory Scheme Example 1 Double Charging for Examination Services: OIR Counsel: Why were the people of Florida paying twice for an examination in this time period? VP of Title Insurer: That was the law. Excerpted from testimony during the Title Insurance Regulation Hearing; August, 2007.

Obstacles – Regulatory Scheme Example 2 Circumventing Statutory Law Limiting Fees: Title Insurer Bulletin to Agents: “…since there will be no regulatory cap on what can be charged for other Closing Services, our recommendation is NOT to charge an “examination fee” styled as such.” Excerpted from “Confidential Bulletin” of a prominent title insurer in Florida dated August 20, 2007.

Attempted Rate Revisions  1992 – Nelson Lipshutz’s “Report on Rates”  1996 – DOI Data Call  1999 – David Cox’s “Report on Rates”  2006 – OIR / FSU - Rate Report  2007 – Allen Schwartz’s Data Call Findings

Strategies for the Future Strategies for the Future  Require Insurers to Make Individual Rate Filings for Approval  Deregulate Agent Charges  Remove the Attorney “Agent” Exemption

Thank You This presentation is available at the Florida Office of Insurance Regulation Web Site