The New York Department of Financial Services (DFS) hopes to do a little spring cleaning in the title insurance industry by rationalizing business practices in the state through new regulations.
According to the agency, the state hopes to clamp down on business practices in the referral and procurement of title insurance, which are bloating prices and have become a burden on consumers.
A report published by the
Niagara Gazette said that the DFS wants to crack down on “questionable” incentives for the steering of home buyers to preferred insurance firms and agents, which the agency reportedly said had “flourished” in New York.
Title insurance protects real estate buyers from challenges to their property title and indemnifies the buyer and lender should ownership of the property be brought under question. The industry is worth about $1 billion in New York, according to authorities.
First American Title Insurance Co. vice president James De Salvo acknowledged in a 2013 DFS hearing that these practices, which includes spending on meals and entertainment, was part of the industry’s marketing.
DeSalvo was said to have called these practices the “800-pound gorilla in the room.”
“Under the present system, that is the way that the products have been marketed and advertised and we participate in that fashion just like any other company to be competitive within our market,” he was reported as saying.
However, state senate Insurance Committee chair James Seward expressed concern over the proposal’s “unintended consequences,” which could harm small businesses.
“They could have a serious detrimental impact on the title insurance market and the real estate market,” he was quoted as saying. “We don’t want smaller companies tripped up in this.”
Seward said he is seeking a compromise that would curb such practices, but at the same time take into consideration the concerns of title insurance agents and companies.
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