We’ve been hearing more and more about “state-run title insurance” and how Iowa (of all states) is supposed to be a model for the whole country. A standard of efficiency and fairness. A paradise for consumers and professionals alike. If you ask us, it’s a socialist pipe-dream that will never happen. And here’s why.
But before diving into the reasons why this is quite a silly proposition for the entire US, let’s first catch up on what happens in Iowa. The state has only one underwriter, that is Iowa Title Guaranty. No First American, no Old Republic, no Fidelity, nothing. Just the state-owned and run title insurance company.
So, the state of Iowa, charges very low, flat fees for title insurance, passing a hefty amount of those (albeit low) fees to abstractors and attorneys. Supposedly no kickbacks ending up with lenders and real estate professionals. Everything seems very transparent and consumer friendly. Iowa boasts very low claim rates, therefore justifying for the low premium amounts Iowa Title Guaranty charges.
Everything seems perfect, and people who claim “state-run title insurance” should be a thing is using Iowa as an example that would be applicable to the entire country.
And here lies the first problem.
The whole country is NOT Iowa. Iowa is a much more simple state, with far less issues than states such as NY, FL and LA. You just can’t compare them.
Anyone who thinks premium rates in states like the above-mentioned doesn’t understand the concept of risk and how insurance premiums are influenced by the risk factors at hand. The bigger the market is, the more you’ll find all sorts of scumbags. Not to mention rampant fraud.
It’s only normal for premiums to run a lot higher depending on the market. So … so much for “premium rates are too high, it’s a scam, they should be low like in Iowa”.
Now, it’s also normal to have competition. When you don’t have competition, and you’re facing a monopoly of any kind (private or public) you risk having premiums go a lot higher than market conditions impose.
So it’s actually OK to have private underwriters competing for their share of the market, working in their own self-interest, guided by customer satisfaction.
If you want to argue with that and you don’t want to go into a socialist vs capitalist type of debate, just take a look at how “well” Obamacare works. Also try to look back at what happened every single time government intervened and tried to regulate an industry. Likely not something to brag about.
Finally, there’s the “technology allows for better land records” effectively eliminating the need for title insurance argument. How the rest of the developed world is supposedly using Torrens, a system of land records that is more advanced and accurate than the ones the US is using. And through which the state is guaranteeing title through an “exhaustive and well maintained public record”.
And you need to take it from us, a tech-firm, whose title agency app is used by sooo many title agencies in the country. Technology is NOT infailible. Things do go wrong. There is no perfect solution that prevents anything from happening.
Look, we get it … It’s easy to maintain records for countries with populations around 10 – 15 million people, that have a vastly simplified administrative structure. I said it’s easy, not foolproof. People make mistakes. People who maintain public records make mistakes. You get the point.
But this is America. There are 300+ million people living here. The real estate market is the most valuable, fastest moving in the world. Just HOW MANY public workers would we need to maintain these public records … AND … what if they screw up? Is Sweden or Germany going to help us figure it out, because historically we’ve been the ones helping the world “figure things out”.