A 10% reduction in title insurance premiums was recently ordered by the Texas Department of Insurance (TDI), with the regulator citing profit ratios that were deemed to be excessive. The mandate is set to go into effect July 1.
Texas insurance commissioner Cassie Brown’s office laid out what led to the move in a written order containing provisions analyzed by the Texas Land Title Association (TLTA) and the Texas Office of Public Insurance Counsel (OPIC).
According to the order, TLTA advocated for no changes to title insurance premiums while OPIC recommended a reduction of 8.9% to 19%.
Data shows an average profit ratio for Texas title insurers of 26.6% in 2022, an increase from the annual average of 17.5% between 2003 and 2022.
“Sustaining the current levels of profits in the current real estate market with the current levels of inflation would not be reasonable as to the public,” TDI explained. “Texans are being affected by housing affordability across the state. A reduction in title insurance basic premium rates would likely help bring the actual profit ratio closer to the target.”
Brown said the new reduction will save Texas consumers an estimated $238 million per year.
“Every time a Texan buys a home, they will spend less on closing costs. This move supports housing affordability and will keep more money in homebuyers’ pockets,” she said.
Chuck Cain, senior vice president of the national agency division for the FNF Family of Companies, said that Texas consumer and business groups have been pushing for reductions to title insurance premiums for several years.
“These groups have generally used the excuse of the increase in premiums collected due to increased sale prices,” Cain said. “This argument doesn’t reflect the fact that when sale prices rise while premiums rise, so does the dollar exposure on risk.
“The (property and casualty) industry in Texas has been even more caught in this bind. While Texas has not been generally known for sweeping regulation, the TDI has always been zealous, perhaps more than any other state’s department of insurance, in protecting what they see as the interest of the consumers and citizens of Texas. Rates were rolled back a few years ago essentially based on a worked-out compromise between the TDI and TLTA , so the present initiative was not new nor necessarily unexpected.”
Cain added that more recent data beyond 2022 should have been considered before ordering a reduction in premiums.
“Ten percent appears to be a splitting of the cake,” he said. “TLTA has filed an appeal as to the reduction arguing, among other things, that the TDI only used data through 2022 and that more current data which is available should have been used.
“Given the recent drop in home prices in several Texas markets, particularly Austin, it does not seem unreasonable to me that more current available data should have been used. As to what the rates should be, not being an actuarial, I could not give you an educated number. Given TLTA’s appeal and a letter requesting justification of the rollback written to the TDI by a Texas senator who is a committee chair that oversees insurance in the state, we have likely not heard the last of this.”
