New Mexico AG Asking for Lower Title Insurance Rates
|January 14, 2008|
Attorney General Gary King’s office filed a pleading before the New Mexico Superintendent of Insurance urging an 11.4% reduction in overall rates. It is the position of the Attorney General that title insurance companies have no real incentive to compete on prices charged to consumers and therefore, insurance underwriters market their services to agents rather than to homeowners. “This creates fertile ground for the possibility of inflated expenses, negatively affecting the rate charged to the consumer,” says AG King. “In fact, we think the current system has created reverse competition which is definitely not in the best interests of New Mexico homeowners.” Executive Director of the Center for Economic Justice Birney Birnbaum explains, “Reverse competition refers to a market structure in which title agents and title insurers market their products and services to real estate professionals who are in a position to steer the ultimate consumer – the consumer paying for the title insurance or escrow – to the title agent or title insurer. The competition for the referrers’ business involves the title agent or title insurer providing things of value to the referrers and passing these sales and marketing costs onto consumers, who have no ability to exert market pressure on title insurance or escrow prices. There can be no assumption that actual expenses incurred by the title agents and title insurers in New Mexico are reasonable expenses for purposes establishing reasonable title insurance rates.” In order to assure that the cost of title insurance bears a reasonable relationship to the risks incurred by underwriters and benefits realized by state homeowners, more accurate and complete data is essential. For that reason, the Attorney General’s Office will also ask the Insurance Commissioner to revise the commission’s ‘data call’ to title insurance agents in the State of New Mexico in order to collect data that identifies unreasonable expenses resulting from reverse competition. A response to the AG’s requests from the Insurance Commission is anticipated within 30 days.
Source: Attorney General