California's Insurance Commissioner Investigates Title Insurance Companies for Overcharging Home Buyers

California's insurance commissioner, John Garamendi, is investigating several title insurance companies, including Fidelity National Financial and LandAmerica Financial Group, for allegedly overcharging home buyers and splitting the excessive fees with companies that have steered them the business. Garamendi's office became aware of the questionable payments when an official of First American reported them last fall, and he has since subpoenaed the records of two title insurers and plans to take testimony from the executives of the largest title insurance companies.

Key Takeaways:

• The investigation is focusing on several title insurance companies, including Fidelity National Financial and LandAmerica Financial Group, for allegedly overcharging home buyers and splitting the excessive fees with companies that have steered them the business.
• The commissioner's office believes this to be a widespread practice, with the larger title insurance companies expanding their reach nationwide through mergers and acquisitions over the last five years.
• The three title insurance companies named so far in the investigations - Fidelity National, First American, and LandAmerica - control 75% of the title insurance market in California.
• The average home buyer in California pays $1,350 for title insurance, with $350 going to processing by the title insurance company, and the remaining $1,000 being paid to a captive reinsurance company.
• Fidelity National and LandAmerica did business in several states, and the commissioner plans to examine companies that have captive reinsurance subsidiaries.
• First American has agreed to cease participating in the title insurance arrangements and is refunding $24 million in title insurance premiums.
• The commissioner's announcement followed a $24 million settlement reached between the Colorado Division of Insurance and First American.

Statistics:

• 75% of the title insurance market in California is controlled by Fidelity National, First American, and LandAmerica.
• $1,350 is the average amount homebuyers pay for title insurance in California.
• $350 of the average title insurance premium goes to processing by the title insurance company.
• $1,000 of the average title insurance premium is paid to a captive reinsurance company.
• $24 million is the amount of title insurance premiums refunded by First American as part of the settlement.

Sources:

• "California's Insurance Commissioner Investigates Title Insurance Companies for Overcharging Home Buyers," The New York Times.
• "First American Title Insurance Company Agrees to Settlement with Colorado Division of Insurance," press release from the Colorado Division of Insurance.