Most consumers have no idea when they buy a house that they can price-shop for the title insurance they’ll need.
A new Missouri law aims to make that easier — while making it harder for unscrupulous insurance agents to scam consumers.
The new law:
— Requires that title agents give quotes to consumers, breaking down the price for insurance premium, title search or other services. Everything but the premium is price negotiable.
— Requires title underwriting companies to supervise and audit the agents who sell their title insurance. There are 4,756 such agents at 524 title agencies in the state.
— Bans agents from commingling consumer money kept in escrow accounts with other accounts.
Missouri insurance regulators say some title agents have misled consumers by lumping charges together and calling everything the “premium.”
Last November, regulators accused 16 title insurance agencies in the St. Louis area of misrepresenting or concealing their prices. It was apparently the first such crackdown in decades.
The state accused 10 of the agencies of charging some consumers more for the same insurance, and two of paying hidden rebates or kickbacks to individuals or companies that sent them customers.
Consumers often know little about title insurance and depend upon real estate salespeople to steer them to insurance agents. How much each buyer pays depends upon who sends them.
One company charged up to $610 to some buyers and $485 to others for the same title insurance premium.
The new law requires real estate companies to disclose their relationships with any affiliated companies.
Gov. Matt Blunt signed the legislation into law on Friday, saying it “cracks down on loopholes to put a stop to unscrupulous insurance agents and ensure all agents protect their customers’ best interests.”
The legislation increases the civil penalties for agents who take advantage of consumers from $100 to as much as $20,000 per violation, with a maximum of up to $1 million for multiple violations.
If the fraud causes a financial loss to the consumer, the penalty rises to up to $1 million per violation, with no limit for multiple violations.
The legislation was driven by the failures of eight title agencies here, including five in 2004 and 2005.
State insurance regulators argued that they were powerless under the old law to prevent agents from misusing consumer funds they were supposed to keep safe in escrow accounts. That was a big problem among the agencies that failed, including some that were later convicted of fraud.
In addition, Doug Ommen, the state insurance commissioner, told legislators that “price transparency” would help consumers get the best price. The legislation, Senate Bill 66, passed the House 116-40, and the Senate 29-2.
Ommen said the insurance department didn’t get everything it had asked for in the legislation. “But we think this is a really good step in consumer protection,” he said.
Title insurance isn’t required by law. Lenders require it because it protects them if the buyer ends up with a home without a clear title.
Michael D. Sorkin, ST. LOUIS POST-DISPATCH