If you own a home in Texas, or may buy or sell one, this illuminating article on title insurance is essential reading, Entitled to profit: In Texas, title insurance is a “total scam” . Published by investigative news outlet, Texas Observer, the article exposes the title insurance business as a reverse Robinhood system, in which Texas law “forbids competition and sets rates higher than anywhere else in the country, with all the profit flowing in private pockets.”
Title insurance costs more in Texas than any other state. The average premium here is $1,808, far higher than New York, ($1,125), Oklahoma ($850), and Iowa ($110), for example. Yet legal challenges to property title are extremely rare in modern suburbia and few claims are ever filed with title insurance companies. The industry’s loss ratio is only 1.2%, meaning that for every $1 of premiums, the industry pays out less than two cents to policyholders. In contrast, the homeowners insurance industry pays out a vastly larger amount for policyholder claims, ranging from 50% to 90% of revenues.
A Texas Pubic Policy Foundation study concluded that the true cost of Texas title insurance is only about $328, to cover a title examination and bearing the risk of a future claim. As the article concludes, the high, state-mandated price of title insurance increases housing costs for everyone in Texas, while the industry employs a legion of lobbyists to influence legislators and maintain the status quo. In Iowa, the title insurance industry, described by the state supreme court as “an invidious form of business,” has been banned by legislators.