Slow as Molasses Housing Market Affects Title Insurance Profits

According to a new report by AM Best, title insurers are experiencing losses as an industry for the first time in 17 years. This translates to a $84.5 million loss.

Factors contributing to the loss are similar to the issues raised in my last post on title insurance and include a large slowdown in sales of title insurance as properties languish on the market ( 10.4 months of inventory on the market, 33.1% drop in housing starts). Also contributing is inadequate loss reserving practices earlier this decade and agent fraud and embezzlement.

Though expenses are rising, the increase is due to falling premium revenues rather than a real increase in expenses. In my opinion, this is due to increasing levels of title recording automation at the county level, allowing title insurers to hold the line on their expenses due to running the title plant itself. Keeping expenses in alignment with premium revenues is a key challenge for title insurers.

The outlook for title insurers is iffy with the continuing housing adjustments.

You can see a free excerpt from the report or purchase the full copy.