Why does title insurance cost so much?
Title insurance differs from other types of coverage because most of the money collected in premiums is not paid out in claims. A 2007 federal report offered the following comparison: Property and casualty insurance policies that cover cars and homes paid out 73 percent of the money collected from customers to cover claims in 2005. For title insurance, only 5 percent of what customers paid was needed to cover claims. Attorney agents who research property histories are usually paid to conduct the title search and also usually keep 70 to 80 percent of the premium paid for the title policy. Representatives of the industry say searching property records is time-consuming and expensive work. But federal reports say it’s difficult to determine how much it really costs to conduct the research and whether the compensation is reasonable. Birny Birnbaum, a Texas-based economist and insurance expert, said title insurance is overpriced. He said prices are pushed up by “reverse competition”: Title
