INCOME IS NOT PROFIT!!!!

I’ve seen it again, and I can’t stand it anymore. The fourth estate has again declared that normal accounting rules don’t apply to title insurance agents. At least once a month I’ll see something similar to this in the press:

“Resnick also charges that, unlike property and casualty insurance companies that pay out an average of 70 percent of what they collect in claims, title insurance companies pay only a maximum of $125 for the title check and an average of $74 in claims, leaving them a profit of more than 90 percent, the lawsuit says.” (emphasis added)

Premium minus costs of goods sold is Gross Profit:

“Gross profit or sales profit or gross operating profit is the difference between revenue and the cost of making a product or providing a service, before deducting overheads, payroll, taxation, and interest payments.”

The 90% figure arrived at above is not even Gross Profit – one would still have to account for the labor and materials directly involved in the transaction, including remittance to the underwriter. More importantly, most people think of net profit when the term “profit” is used. To arrive at net profit one has to subtract “minor” items like taxes, insurance, rent, health care, etc.

Hopefully that number is still positive, and no way is it 90%. If it was, Warren Buffett would own every title agency in creation.

I’m tired of lazy, incompetent, or just plain malicious reporting misguiding the public about our industry. Even more dangerous to our well being, those who legislate and regulate are being fed this same bad math. This math is being used to make important decisions about the future of the industry.  We, as an industry, have to take a stand NOW. If you see it, call them on it. I will. ALTA, where are you?