Direct-to-consumer title insurers shake it up
The claim: Savings of 35% on title insurance costs
For many homebuyers, they don’t hear anything about their new home’s title until they’re already signing the closing documents.
In many cases, they’re signing those documents at the offices of a title company they didn’t know about until the negotiations were already over.
They hear words like title insurance and just gloss over it like so many of the other technical terms that are thrown around during the closing process.
But with homebuyers becoming more involved in the nuances of the home buying process and more interested in saving as much money as possible, homebuyers have begun looking for discounts in all parts of the closing process.
Now they’re educating themselves about title insurance, searching the web and finding title insurance companies offering discounts of 35% or more.
Entitle Direct Insurance markets direct to homebuyers online and offers “up to 35% savings on title insurance costs when compared to other major title insurance companies,” according to the company’s website.
The company can offer these savings because as its website states, “In most instances, consumers buy their title insurance policy from a title agent who receives a commission from the title insurance company. This commission varies by state but is typically 65% to 90% of the premium paid.
“Title agents add legitimate value to the supply chain by providing the customer to the insurance company. However, title insurance companies ‘compete’ for business by offering higher commission rates and other perks to title agents. This drives up the cost of title insurance to the ultimate purchaser: you, the consumer.”
So, by offering title insurance directly to the consumer and cutting out the commission-based title agent, the company can offer lower rates.
The company currently operates in 40 states, although in some states title insurance rates are set by the state and therefore are not subject to discounts. The company is rated “A-Prime” in financial stability by Demotech, which rates insurer’s financial stability. “A-Prime” is Demotech’s second highest rating. Only industry leaders such as Old Republic National Title Insurance Company (ORI) and First American Title Insurance Company (FAF) have received a higher rating than Entitle.
Entitle is equally rated with Fidelity National Title Insurance Company (FNF).
Entitle isn’t the only company offering discounts on title insurance. OneTitle is a New-York based title insurance company that markets direct to the consumer and offers savings of 10% on title insurance. The company operates in all 62 counties in New York and its insurance policies are backed by Lloyd’s of London.
OneTitle achieved a “Substantial” ranking in Demotech’s financial stability rankings, which is two ratings below the “A-Prime” level of Entitle but still acceptable to most lenders. “Financial stability ratings of ‘A-Double Prime’, ‘A-Prime’, ‘Exceptional’ and ‘Substantial’ are accepted by the major participants in the secondary mortgage marketplace which in turn facilitates the acceptance of title underwriters rated ‘Substantial’ or better,” Demotech says.
Redfin has even gotten into the title insurance discount game itself, with the launch of Title Forward. Title Forward seeks to educate customers on what exactly title insurance is and then help them find cheaper title insurance. The company currently operates in Georgia, Maryland, Pennsylvania, Virginia and Washington, D.C.
For homebuyers, these new options for title insurance represent an opportunity save hundreds or possibly thousands of dollars during the closing process. For many homebuyers, the opportunity to save outweighs the risk of using a company that may not be as experienced or well-versed in the title investigation process that precedes the completion of the sale.
But with company’s like Lloyd’s of London backing up these title insurance companies, consumers can rest a little easier knowing that their title is protected and that their wallet is a little fatter thanks to cutting out the commissioned title agents.
Welcome to the “Zillow-ization” of the title insurance world.