Title Insurance and Consumers – Boiling the Ocean

When Francine suggested three years ago that we market direct to consumers, I quickly replied – “no way, it’s like boiling the ocean.” At the time, most consumers weren’t aware of title insurance, let alone prepared to shop for it. For a small independent agent to try to educate a huge audience who has little no knowledge of our product was unthinkable. Much has changed in those three years, but has it changed enough?

  • Title insurance agents are a presence on the Internet in vastly increasing numbers (creating a potential market)
  • Consumer education has taken off:
    • Title insurance blogs and posts about title insurance are much more common
    • Lead aggregation sites like Title Insurance.com launched PR campaigns to educate consumers
    • ALTA is now sponsoring the Homeowner 101 consumer education site
  • Title Insurance is creeping into the public awareness. Good news like California’s competitive pricing attempt and bad news like title agency defalcations (yes, even bad news is good publicity) are catching the media spotlight

We receive a decent percentage of our business from online and other consumer advertising, but it’s a drop in the bucket compared to the referrals we receive from professionals. (we don’t have an ABA).

So, we might not have to boil an ocean, it’s more like a small sea now – but it’s still too big to boil. Why is selling title insurance to consumers so difficult?

To shop for title insurance a potential buyer not only needs a market in which to shop, but also enough knowledge of the product and its structure to effectively evaluate competing offers (e.g., what is the difference between an owner’s and a lender’s policy?). Finding the market and gaining that knowledge requires an investment of time.

Buyers of title insurance need to feel there is a return for their shopping “investment”:

  • The savings should be significant, or
  • There is a significant variation in quality of the product, or
  • The transaction occurs frequently

In addition, once educated, you must be able to reasonably compare the offerings

Let’s explore each.

Dollar value of savings – in most locales the savings obtained by shopping for title insurance will be at most a couple of hundred dollars. I don’t believe there are any legitimate comparison shopping studies out there, but I’d guess the average total savings would be something less than $100. Not insignificant, but not significant to motivate most consumers

Quality – In an ideal market, you’d be able to evaluate both price and quality. But currently there is no easy way to determine the quality of a title insurance agent. We don’t have quality ranking websites nor do we even have a “good housekeeping seal.”

Frequency of transaction – outside of the real estate boom of the last several years, a title insurance transaction doesn’t occur frequently for most people. Not frequently enough to invest significant time to truly understand what is a fairly complex product with significant variables.

Must be able to evaluate the offering – In PA, there are 4 tiers of refinance rates based on the amount of time since the last evidence of title insurance. The rules for “evidence” are ambiguous enough that title professionals are sometimes uncertain which rate to apply. In addition there are several other allowable line items from Notary to courier and wire fees. Not everyone provides every line item in a quote. How can a layperson ever hope to make sure they are receiving the correct rates and that the lowest total rate will actually “stick?”

The low potential savings and the high level of complexity (real or perceived) conspire to make it much easier to trust an “expert.” The only expert that a consumer knows is their real estate agent or loan officer. Why wouldn’t anyone take the recommendation of someone they already trust?

I cannot tell you how many times I’ve provided a title insurance quote only to hear back: “Your price is a little better/about the same as the one referred to me, so I think I’ll be going with the referral.” There isn’t enough variation in our offerings to enable a consumer to make the selection on their own.

There will always be a set of consumers who will be motivated to shop for title insurance on their own, and hopefully that number will grow. But we would be fooling ourselves by believing that the volume will grow fast enough to make a real difference in our business in the near term

Like it or not we have to live with the influencers – they are here for some time to come. I have to disagree with Ed and Titleopoly – the problem with referrals isn’t the act, it’s the motivation. The referral process is easy to corrupt. HUD is looking the other way while individuals with conflicts of interest make money by ramroding their clients into ABAs. This fundamental flaw in RESPA has created a culture of corruption around all referrals.

The consumer isn’t coming to our rescue for some time. It’s time we rolled up our sleeves and attacked the true problem – the corruption of the referral process, starting with the ABAs.

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6 responses to “Title Insurance and Consumers – Boiling the Ocean

  1. Dave,
    I like your article and feel it has much merit. I also like Ed Ryb’s ideas against reverse marketing…If your ideas were ‘blended’ the underwriters in the ‘ivory towers’ can concentrate on marketing to the consumer, while we, the agents on the front lines could exercise your networking suggestions!!!

  2. Dave, as a home builder I have been forced to direct my clients to a specific title company and mortgage company. If they choose their own, and those companies mess up or ruin a closing, I can be looking at thousands of dollars in interest or even a cancelled deal.

  3. There is much about your article that I agree with. I have thought hard about the concept of marketing to the general public and I always seem to come back to this. We have tons of pressure to keep our pricing low and marketing to the public is very expensive. Something has to give and maybe one day it will.

  4. Marketing to the public is as cheap or expensive as you’d like it to be. Web presence is pretty darn cheap and homes magazines are very affordable.

    Maybe it helped that I used to sell real estate and was a mortgage originator. You see, I was really selling was myself. Advertising and marketing pull calls to you. While you chat and answer questions, in most cases, the decision the consumer is making is whether or not they like YOU.

    There is an underserved percentage of consumers who don’t want to use attorneys and don’t want to simply go with wherever their lender or Realtor refer them. They may simply look for an alternative to verify if the party to whom they have been referred is reasonably priced. Even if your prices are exactly the same, you can use this short sales opportunity to demonstrate what working with YOUR office will be like. Is your staff pleasant when they answer the phone. Do you return calls promptly. These are all valid decision making points consumers use to direct their own business.

    If you are not out there asking them to call you, they won’t.

    So, though I love the phrase boiling an ocean, I prefer to think of it as fishing in a river.

  5. Excellent analysis and breakdown. I do have to disagree with the point about the difference in prices. On the surface their may be only a small difference but in many cases their is no apples to apples comparison. I don’t know how many times we have heard that our quote is very close to a referred title company but when all of the fees and charges are included we come out much lower. It is important to make sure the consumer is actually being shown all of the charges they will see. Sometimes they are still very close but many times we have seen a huge discrepancy when everything is factored into the quote.

  6. Mark –

    On the issue of showing all the fees, I couldn’t agree more. We always do. Most others do not.

    The biggest hurdle is trying to get the consumer to an apples to apples comparison. With the variations in fee amounts and terminology, many consumers give up and go with the referral.

    And that doesn’t even cover the whole issue of bait and switch in fee quotes.

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