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ALTA FEDERAL CONFERENCEALTA FEDERAL CONFERENCE
March 7-8, 2006Washington, D.C.
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OVERVIEWOVERVIEW
• Identify current climate, key issues and
opportunities
• Provide a set of messages members can use
• Ensure that we are all forwarding positive,
consistent messages
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CURRENT CLIMATE
• Reinsurance issue in 2005
• Birnbaum report in California
• Colorado DOI investigation into
ABAs
• Agent defalcations (CO, NY)
• U.S. Rep. Michael Oxley’s letter
to the GAO
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KEY ISSUES & MISPERCEPTIONSKEY ISSUES & MISPERCEPTIONS
• Title insurance costs too much
• Claims are low compared to other lines of insurance, so you are overcharging
• There is a lack of competition in the title industry, keeping costs high
• Technology should lower prices
• Monoline restrictions keep competitors out of the market
• Iowa has a better title insurance system
• The title industry has engaged in bad conduct
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KEY ISSUES & MISPERCEPTIONSKEY ISSUES & MISPERCEPTIONS
There may also be questions raised about:
• The GAO “Study”
• RESPA Reform
• Federal Regulation of Insurance
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OPPORTUNITIESOPPORTUNITIES
• Educate our audiences about title insurance.
• Clear up the misinformation and confusion.
• Communicate the value and benefits of this important
protection.
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TOP 10 MISPERCEPTIONS & QUESTIONSTOP 10 MISPERCEPTIONS & QUESTIONS
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#1 COST#1 COST
Some have criticized the cost for title insurance. Are premiums in line with the value of the product?
• A one-time premium covers the life of a loan and/or
property ownership. For the price, it’s a bargain.
• Rates are heavily regulated.
• Rates must ensure reserves and solvency of
insurers.
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#2 CLAIMS#2 CLAIMS
Why do title insurers only pay 5% of premiums in claims when property and casualty companies pay 70%? Aren’t you gouging consumers to increase your profits?
• Title insurance is based on loss prevention rather than loss assumption. The majority of our costs are on the front end.
• Our expenses total 90% of the premium dollar compared to P&C companies at approximately 25%.
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#3 COMPETITION
When closing services are largely selected by disinterested third parties (i.e. real estate and mortgage professionals), doesn’t that foster a non-competitive atmosphere, at least in terms of price?
• In truth, consumers choose not to get involved in the process.
• Title companies compete fiercely for business with
“third-parties”.
• Consumers should be helped to understand why
they need this important protection.
• ALTA’s Web site has information to help
consumers make informed decisions.
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#4 TECHNOLOGY#4 TECHNOLOGY
Haven’t advances in technology made it easier to do a title search, and shouldn’t prices reflect that?
• Title searches are not like a “Google” search.
• Only 10-15% of counties have automated title files.
• Most rely on manual searches of paper-based
archives.
• Counties don’t have the budget to automate title
data.
• Private “title plants” are expanding, but represent a
considerable cost.
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#5 MONOLINE#5 MONOLINE
What are monoline restrictions, and are they still applicable today? Don’t they prevent competitors from entering the market, which would lower prices?
• Monoline restricts companies writing certain high-
risk lines of insurance to writing only those lines.
• Monoline ensures the reserves and solvency of
insurers for the protection of policyholders.
• Non-title insurers lack appropriate reserves and
underwriting experience for title insurance.
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#6 IOWA SYSTEM#6 IOWA SYSTEM
Iowa’s system of title insurance is run by the state. Why haven’t other states followed Iowa’s example?
• Most Iowa mortgages are insured out of state.
• Only half of title losses are covered by Iowa system.
• As a government-run monopoly, there is no
competitive incentive to keep pace with markets
and consumer needs.
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#7 INDUSTRY CONDUCT#7 INDUSTRY CONDUCT
We keep hearing about agent defalcations, kickbacks, and regulatory actions being taken against title companies. Is this an industry-wide problem?
• Every industry has its share of “bad apples” and fraudulent activity.
• Fraudulent practices should be prosecuted to the full extent of the law.
• ALTA supports practices that are compliant with the laws and regulations governing the title industry.
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#8 GAO#8 GAO
Why is the GAO looking into the title industry?
• The complexity of our business has created
misinformation and misunderstanding about title
insurance.
• ALTA met with and is assisting the GAO fully.
• We view this as an opportunity to clear up the
confusion that exists in the marketplace.
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#9 RESPA REFORM#9 RESPA REFORM
Does the title industry support RESPA reform, and how will that impact your business?
• ALTA supports HUD’s efforts to make the home
buying process more transparent for consumers.
• ALTA actively participated in all HUD-sponsored
workshops last year.
• It is unknown when HUD might publish a
proposed rule, or what that rule might include.
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#10 FEDERAL REGULATION OF INSURANCE#10 FEDERAL REGULATION OF INSURANCE
What about regulating title insurance at the federal level. Will that work?
• No.
• Title insurance is very tied to local customs and
laws.
• It represents an enormous undertaking to establish
federal regulations that reflect variations in all 50
states.
• State regulators can respond to the local
marketplace more quickly.
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OPPORTUNITIES AND TOOLSOPPORTUNITIES AND TOOLS
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UPCOMING OPPORTUNITIESUPCOMING OPPORTUNITIES
National Homeownership Month – June 2006
• Proclamation by President Bush
• Supported by HUD Workshops throughout
the country
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HOMEOWNERSHIP MONTHHOMEOWNERSHIP MONTH
Presidential Proclamation:
“From the earliest days of our Nation, homeownership has embodied the core American values of individual freedom, personal responsibility and self-reliance. Homeownership is also a bedrock of the American economy, helping to increase jobs, boost demand for goods and services, and build prosperity.”
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HOMEOWNERSHIP MONTH
The Title Industry:
For 125 years, the title industry has protected the American dream of homeownership. The land records and title insurance system in the U.S. allows people to secure loans on real estate to build, be entrepreneurial, create jobs, and grow our economy.
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HOMEOWNERSHIP MONTHHOMEOWNERSHIP MONTH
Opportunities for Local Involvement:
• Find out what’s happening in your community.
• Initiate a proclamation by your local government.
• Sponsor a booth at a local fair.
• Give a presentation to a local civic group.
• Place an ad and/or article in your local
newspaper.
• Participate in a ‘Habitat for Humanity’ project.
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TITLE INDUSTRYMARKETING KITTITLE INDUSTRYMARKETING KIT
Promote your business while forwarding our value proposition
New addition: Member Article Library (look for article on NHM in May)
Promote your business while forwarding our value proposition
New addition: Member Article Library (look for article on NHM in May)
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