News: 2007 Press Release

SACRAMENTO - Yesterday the Office of Administrative Law (OAL) issued a response to the Department of Insurance's proposed title regulations, a decision which effectively validates the authority of the Insurance Commissioner to issue such regulations. While initially disapproving the regulations, the OAL has taken the not uncommon approach of requesting certain clarifications, and the Department of Insurance is confident that clarifications it provides will satisfy the OAL's concerns. Insurance Commissioner Steve Poizner will move forward expeditiously in the coming weeks to satisfy the OAL's request in conjunction with input from industry and consumer groups. 

STATEMENT

"After an intensive review of market conditions in the title insurance industry, and after discussions with industry representatives and independent experts, I have concluded that reasonable price competition does not exist for title and escrow services. I have therefore taken action to ensure that Californians will not pay excessive rates for title and escrow when they buy, sell or refinance their homes.

"Numerous governmental and academic reports, including two by this Department, have found that title insurance markets do not function competitively to keep prices reasonable. Instead of lowering prices to attract consumer business, title insurers take advantage of the fact that homeowners, who pay for title and escrow services, do not typically shop for those services. Rather, real estate agents, lenders, and homebuilders steer homeowners to particular title companies. Title companies lavish legal and illegal inducements on those intermediaries to obtain the homeowners' business and then pass those costs on to the unaware homeowner.

"As a result, over the past 10 years, even though technology has lowered the costs of title searches and document production, title and escrow charges have not come down. In fact, title insurance on the average home in California costs roughly double what it cost 10 years ago, despite the fact that companies' production costs have plummeted.

"State law says that when reasonable competition is absent and rates are excessive, the Insurance Commissioner must take action to lower prices. Under my predecessor, the Department of Insurance developed regulations to obtain the data necessary to evaluate the companies' costs, to determine whether rates are in fact excessive, and to establish the maximum rates that may be charged in order to avoid excessive rates.

"After my election, I was approached by title companies urging me to stop action on those regulations. I undertook a fresh look at market conditions and at the regulations and concluded that the industry's claims of a competitive market and reasonable rates were incorrect. I therefore decided to proceed with the regulations.

"Those regulations have now been reviewed by the state Office of Administrative Law, which reviews proposed regulations for legality and clarity. The OAL's review effectively validates the Department's authority to issue such regulations, but OAL has asked the Department to make specific changes to clarify certain terms and eliminate certain ambiguities which OAL found. We will make clarifications, in consultation with industry and consumer groups, and resubmit the regulations. I am confident that they will be approved and that these important consumer-protection measures will go into effect.

"I want to emphasize that I am a strong believer in the free market and am skeptical of price regulation. But I am also a realist, and it is clear that where, as here, the market is not functioning properly, strong government action is necessary to protect the public.

"While I will aggressively implement these regulations, I will also pursue legal and structural reforms in the market to introduce price competition - which is ultimately the best protection for consumers.

"Consumers are entitled to a market in which they are sovereign. I am determined to make that the reality in the title and escrow markets."