An Overview of An Overview of Title Insurance RegulationTitle Insurance Regulation

Steve PartonSteve PartonGeneral CounselGeneral Counsel

Florida Office of Insurance RegulationFlorida Office of Insurance RegulationJune 4, 2009June 4, 2009

Title Insurance Advisory Study Council

Tallahassee, Florida

Overview of PresentationOverview of Presentation

Overview of Regulatory StructureOverview of Regulatory Structure

Regulatory ObstaclesRegulatory Obstacles

Strategies to Improve RegulationStrategies to Improve Regulation

Statutory Changes Affecting RegulationStatutory Changes Affecting Regulation

1965 – DOI First Given Regulatory Authority1965 – DOI First Given Regulatory Authority

1992 – 30% Premium Threshold Established for 1992 – 30% Premium Threshold Established for Title Insurance CompaniesTitle Insurance Companies

1999 – Legislature Freezes Premiums1999 – Legislature Freezes Premiums

2003 – Office of Insurance Regulation Founded2003 – Office of Insurance Regulation Founded

2007 – Legislature Amends Definition of “Premium”2007 – Legislature Amends Definition of “Premium”

Evolution of Premium DefinitionEvolution of Premium Definition

F.L. 65-359 & 69-106 – Defined Premium as a F.L. 65-359 & 69-106 – Defined Premium as a

““Pure” Risk Premium.Pure” Risk Premium.

F.L. 92-318 – Definition for Related Title ServicesF.L. 92-318 – Definition for Related Title Services

F.L. 99-286 – Definition of Primary Title ServicesF.L. 99-286 – Definition of Primary Title Services

F.L. 07-44 – Title Services RedefinedF.L. 07-44 – Title Services Redefined

Regulatory StructureRegulatory Structure

1991 – 1997 --- Bureau of Industry Coordination1991 – 1997 --- Bureau of Industry Coordination

1997 -- 2003 --- Specialty Insurer Services1997 -- 2003 --- Specialty Insurer Services

2003 – Present2003 – Present** --- Property & Casualty Section --- Property & Casualty Section

Section 20.121(5), F.S. – “Effective January 7, 2003, the rules of …Section 20.121(5), F.S. – “Effective January 7, 2003, the rules of …the Department of Insurance that were in effect on January 6, the Department of Insurance that were in effect on January 6, 2003, shall become rules of … the Financial Services Commission 2003, shall become rules of … the Financial Services Commission … and shall remain in effect until specifically amended or repealed … and shall remain in effect until specifically amended or repealed in the manner provided by law.”in the manner provided by law.”

* * Since 2003 Title Insurance Agents have been regulated by the Since 2003 Title Insurance Agents have been regulated by the Department of Financial Services.Department of Financial Services.

Regulatory IssuesRegulatory Issues

1) Non-Rule Policy1) Non-Rule Policy

2) Regulatory Scheme2) Regulatory Scheme

Question 1Question 1

Industry*:Industry*: “Must a title agency charge reissue “Must a title agency charge reissue rates, rather than original rates, if a previous rates, rather than original rates, if a previous owner’s policy … is presented … prior to owner’s policy … is presented … prior to closing?”closing?”

DOI**:DOI**: “A title insurance agency must charge “A title insurance agency must charge reissue rates …”reissue rates …”

*Excerpted from title insurer letter dated August 21, 2000

** Excerpted from DOI response dated September 6, 2000

Question 2Question 2

Industry*:Industry*: “Assuming the reissue rate is “Assuming the reissue rate is required … may the issuing agency required … may the issuing agency nonetheless charge more than the reissue nonetheless charge more than the reissue rate … ?”rate … ?”

DOI**:DOI**: “Yes, but disclosure is required”“Yes, but disclosure is required”

*Excerpted from title insurer letter dated August 21, 2000

** Excerpted from DOI response dated September 6, 2000

Question 3Question 3

Industry*:Industry*: “May an agency remit to its “May an agency remit to its underwriter based on reissue rates even if the underwriter based on reissue rates even if the agency charges the consumer original rates agency charges the consumer original rates …?”…?”

DOI**:DOI**: “Yes, if the reissue rate applies and is “Yes, if the reissue rate applies and is disclosed on the closing statement.”disclosed on the closing statement.”

*Excerpted from title insurer letter dated August 21, 2000

** Excerpted from DOI response dated September 6, 2000

Question 4:Question 4:

Industry*:Industry*: “May an agency charge more than “May an agency charge more than the promulgated rate for an original owners or the promulgated rate for an original owners or loan policy, if he discloses the promulgated loan policy, if he discloses the promulgated rate on the settlement statement?”rate on the settlement statement?”

DOI**:DOI**: “Yes; disclosure of the risk premium is “Yes; disclosure of the risk premium is required.”required.”

*Excerpted from title insurer letter dated August 21, 2000

** Excerpted from DOI response dated September 6, 2000

Obstacles – Regulatory SchemeObstacles – Regulatory SchemeExample 1Example 1

Double Charging for Examination Services:Double Charging for Examination Services:

OIR Counsel:OIR Counsel: Why were the people of Florida paying Why were the people of Florida paying twice for an examination in this time period?twice for an examination in this time period?

VP of Title Insurer:VP of Title Insurer: That was the law. That was the law.

Excerpted from testimony during the Title Insurance Regulation Hearing; August, 2007.

Obstacles – Regulatory SchemeObstacles – Regulatory SchemeExample 2Example 2

Circumventing Statutory Law Limiting Fees:Circumventing Statutory Law Limiting Fees:

Title Insurer Bulletin to Agents:Title Insurer Bulletin to Agents:

“…“…since there will be no regulatory cap on what can be since there will be no regulatory cap on what can be charged for other Closing Services, our recommendation charged for other Closing Services, our recommendation is NOT to charge an “examination fee” styled as such.”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 RevisionsAttempted Rate Revisions

1992 – Nelson Lipshutz’s “Report on Rates”1992 – Nelson Lipshutz’s “Report on Rates”

1996 – DOI Data Call1996 – DOI Data Call

1999 – David Cox’s “Report on Rates”1999 – David Cox’s “Report on Rates”

2006 – OIR / FSU - Rate Report2006 – OIR / FSU - Rate Report

2007 – Allen Schwartz’s Data Call Findings2007 – Allen Schwartz’s Data Call Findings

127

THE OIR RULE ADOPTION PROCESS

Noticeof Proposed Rulemaking

SpecialProceedings if

Requestedin 21 Days:

Materials to JAPCat least 21 daysbefore Adoption

Notice of Rule Development

REQUIRED STEPS

Workshop

on Rule

StatementEstimated

Regulatory Cost

Public Hearing

on the Rule

Notice of Changes to JAPC &

Published 21 days before Adoption

Rule filed for Adoption between

28 Days and 90 Days after Notice

Rule Effective 20 Days Later

OPTIONS

DOAHAdministrativeDetermination

Rule goes to Cabinet for approval

FSC Approval to Publish

Strategies for the FutureStrategies for the Future

Require Insurers to Make Individual Rate Require Insurers to Make Individual Rate Filings for ApprovalFilings for Approval

Deregulate Agent ChargesDeregulate Agent Charges

Remove the Attorney “Agent” ExemptionRemove the Attorney “Agent” Exemption

Thank YouThank YouThis presentation is available

at the Florida Office of Insurance Regulation Web SiteWWW.FLOIR.com