Originators know that consumers are often unaware of what goes on behind the curtain while their new home is under contract, and the same is true for title insurers. According to a study by the American Land Title Association (ALTA) and ndp | analytics, a significant amount of time and resources go into closing a standard transaction.
Expert title professionals spend approximately 22 hours to close a standard transaction and 45 hours for more difficult transactions, the study states. In 2023, title insurance companies estimated 36% of transactions were in this more difficult category.
The study, conducted by a strategic economic consulting firm, ndp | analytics, and ALTA in the first quarter of 2024, analyzes the time needed to research title and close a transaction among 674 title insurance companies. The purpose of the study is also to estimate the amount of effort title professionals put into fixing title issues — termed as “curative work” — to protect what is often a homeowner's largest lifetime purchase.
The study notes that nearly all title insurance companies conduct curative actions often or very often and 62% of these companies typically perform at least four curative actions per transaction. In all, 36% of all transactions require extensive, non-routine title clearance efforts. Difficult files, which require substantial curative work, are very common.
"The preventative work done by the title industry is why title insurance has a lower claims rate versus other lines of insurance," said ALTA CEO Diane Tomb.
According to the National Association of Insurance Commissioners, the title insurance industry's expense ratio, which highlights the costs associated with upfront title searching and clearance, averaged 95% over the past decade. Industry data shows that approximately 70 cents of every dollar in revenue are spent on staff and acquiring and analyzing public real estate records data, with office expenses, compliance and taxes comprising the bulk of the remainder.
"Importantly, while inflation has caused the price of most products and services to increase, the cost of title insurance coverage has decreased nearly 8% since 2004," Tomb said.
Despite technological advancements in the title space, only 70% of public records at the county level are digitized and often only the past 10 to 15 years of records are available online, Tomb explained, which means sole reliance on these electronic records is insufficient.
Curative work requires more resources than it did five years ago. The biggest changes were cost, transaction volume and compliance. In 2023, approximately 64% of title insurance companies expressed that expenses related to curative work have increased; 24% reported costs are much higher than five years ago, and 40% said costs are somewhat higher. Over half of companies reported increases in the shares of transactions that require curative actions (55%), the compliance burden (54%) and the complexity of curative work (54%).
"And while the use of technology to research title issues has dramatically increased, it takes more than a click of a button to conduct a search,” Tomb added. “The amount of research and corrective action from expert title professionals needed to provide homeowners and lenders with assurance about their title remains significant."
