Texans: You're Now Paying More For Title Insurance

State approved first rate increase in more than two decades

Sunday, May 5, 2013  |  Updated 4:57 PM CDT
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Texans: You're Now Paying More For Title Insurance

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Texans started paying more for title insurance last week because of a price hike quietly approved in March by the state insurance commissioner.

The 3.8 percent increase is the first in 22 years and will generate an estimated $53 million more per year for Texas title companies and their underwriters, the Austin American-Statesman reported.

The state Department of Insurance and the Office of Public Insurance Counsel recommended the rate hike.

Data submitted by the industry and the loss of business it suffered during the housing downturn justified the increase, said Aaron Day, a lobbyist for the Texas Land Title Association.   

"Some of these companies have been hanging on by their fingernails," Day said.

But title insurance premiums generated in Texas reached $1.4 billion last year, up 24 percent on 2011, according to the American Land Title Association.

"There is no plausible reason why Texas title insurers just got a rate increase. Absurd," said Birny Birnbaum, executive director of the Austin-based Center for Economic Justice, which advocates on behalf of consumers.

A powerful land title lobby protects an industry that has yet to be exposed to the deregulation that has reshaped so many other industries in Texas.

Title insurance is required for any new mortgage or refinancing deal to show the title is clear. And the cost of the policies is set by the state.

University of Texas professor David Eaton estimates that Texas consumers would save, on average, $700 per policy if the state stopped fixing the price of premiums. He and his students at the LBJ School of Public Affairs found that states that don't regulate title insurance have the lowest rates. Those with the most regulation -- Texas and Florida -- have the highest.

"There is zero price competition for title insurance in the state of Texas," said state Rep. Matt Schaefer, R-Tyler, at a hearing last month. He was pushing a bill that would change the rate system to something used in other types of insurance.

"The title industry is incredibly powerful," said Republican state Rep. John Smithee, of Amarillo, who chairs the House Insurance Committee and who supports Schaefer's bill. "I think every member of the House has one or two title companies in their district. There's never been anything as effective as a phone call from a local person."

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