FOR IMMEDIATE RELEASE
TITLE INSURERS AGREE TO SWEEPING REFORMS
First American and Fidelity to Change Practices and Reduce Rates
State Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills today announced agreements with two leading title insurance companies to resolve investigations related to illegal rebates and referral fees.
Under the first-of-their-kind agreements, Fidelity National Title Group, Inc. and First American Title Insurance Company will seek title insurance rate reductions of 15 percent for all properties up to $1 million in New York.
"This settlement should greatly benefit New York home buyers who for too long have paid too much for their title insurance," said Spitzer, who noted that New York title insurance rates are the highest in the nation.
Superintendent Mills said: "Today's settlement agreement is tremendous news for New Yorkers in the market for a new home and is an important milestone in our efforts to protect insurance consumers in this state."
The Attorney General and the Superintendent began the investigation of title insurance industry practices in 2004 as part of their investigation of bid rigging and steering in the property and casualty insurance market.
The new probe revealed evidence of an illegal scheme by which real estate developers would receive free or discounted title insurance in other states in exchange for giving their New York business to the settling insurance companies. These discounts were not available to home purchasers and small businesses, who in effect subsidized the illegal rebates by paying the "full freight" of New Yorks high title insurance rates. The investigation also found that the insurance companies paid illegal referral fees to their customers representatives who did not perform any substantial services.
Both companies agreed to end these illegal practices and also agreed to ensure that home buyers are not subject to last minute "add ons" at real estate closings (last minute charges from title agents). In addition, the companies will establish web sites that will enable consumers to calculate the New York regulated title insurance premium for themselves.
Together, Fidelity and First American account for more than half of the title insurance market in New York, and the agreement is expected to provide significant benefits for millions of New York home buyers. The Attorney General commended First American for its initiative in reaching todays agreements and acknowledged both companies cooperation.
The joint investigation of other title insurers and title agents is continuing.
Title insurance protects property owners from potential losses that could result from a claim or disputes regarding title in a real estate transaction. In 2004, New York title insurers collected about $1.1 billion in premiums.
Under New York law, title insurance rates are filed with and approved by the State Insurance Department. It is illegal for title insurance companies to charge anything but the filed and approved rate. New York law also prohibits title insurers from paying rebates to their customers and certain referral fees to their customers representatives. The New York State Insurance Department will hold hearings later this year to review New York title insurance rates and related matters.
The investigation underlying today's agreements was conducted by Assistant Attorneys General Hannah K. Flamenbaum, Ethan Zlotchew, Nancy Haber, James Park, Maria Filipakis, Matthew Gaul and Anita Barrett under the direction of David D. Brown IV, Chief of the Attorney Generals Investment Protection Bureau.
Susan Donnellan, Deputy General Counsel of the New York State Department of Insurance, and Jon Rothblatt, Principal Attorney, led the Insurance Departments investigation.