Value of Title Insurance

The Mystery of Title Insurance

Title insurance is still a mystery to many consumers, at least according to a recent survey conducted by Forum Strategies on behalf of the American Land Title Association (ALTA). CEO Michelle Korsmo told The Title Report she wanted to know how the industry could explain the value of title insurance and the role of the agent in a more meaningful way.

"We try to explain our product, but we're not saying anything that makes sense to the consumer," Korsmo said. "Consumers want to hear how it benefits them. That's the mental shift we have to make."

The Study

David Laufer, principal at Forum Strategies, hosted a session at the recent ALTA Annual Convention, "Explain the Value of Title Insurance: Creating an Effective Message." He asked what lenders know about title insurance. What do homebuyers and Realtors know? What do people think about the title search and title insurance, and how deep does that knowledge go? The firm started with 10 focus groups in five cities across the country.

"We did four homeowner groups, three with Realtors and three groups with lenders," he said. "We started in New York, then went to Jacksonville, Fla.; Austin, Texas; Omaha, Neb.; and Sacramento, Calif. There were about 10 people in each group. We watched what they responded to and what the hot buttons are and used that information to structure the survey. We had 1,006 (online) respondents. It was fairly detailed with approximately 50 questions."

The Results

Much of the results hit a positive note. According to the survey, 72 percent felt they understood what happens during a title search and what a title search is, and 96 percent felt title searches were very important. Michele Mitola, vice president at Forum Strategies, said 75 percent thought they understood title insurance either somewhat well or very well. And 63 percent said title insurance is a small price to pay to protect their investment against a claim.

Confusion and Understanding

However, there is still some confusion surrounding the industry. According to the survey, only 55 percent were aware there are two insurance policies, and 59 percent thought they had a homeowner's policy. More than a quarter of the respondents were unsure. In the focus groups, even industry professionals such as lenders and Realtors were unsure about the process and purpose of title insurance.

"The problem is there's significant confusion," Laufer said. "They think they know about this, but that knowledge falls short."

However, when the consumer is fully aware, the study showed many had a good impression of title insurance and wanted it. Those that were informed earlier in the process especially were favorable.

"It surprised me how much it made a difference when people learned about title insurance early in the process," Korsmo said. "If you can get to buyers when they have selected the house and they're going through the process and explain the value of the title insurance product, it can make a huge difference in how the work is done and their understanding of what they have."

Educating on Title Insurance

According to the survey, 53 percent of respondents said they wanted information about title insurance when they started working with the lender, and 37 percent wanted the information when they began working with the real estate agent. Those who recalled receiving information about the option to purchase an owner's title insurance policy were significantly more likely, 77 percent, to have a favorable opinion of the title companies and the work they do.

That education component extends not just to the consumer, but to lenders and real estate agents as well.

"It's the responsibility of the title agent, settlement agent or title agency to educate everyone in the process about title insurance," Korsmo said. "Not only do we need to realize that we can't rely on our professional partners to do the education, we also have to take time to educate those professional partners. The more we do that, the better it's going to be when the real estate agents and lenders talk to the buyers or the sellers about title insurance early on in the process."

It's also important to communicate that message across all the platforms available. The information has to be available in the manner consumers and professional partners are going to receive it. Use video messages, printed brochures, websites and mobile platforms to get the message out there clearly and early.

Forum Strategies also spoke with regulators who had a similar message. They said it's important title companies reach out directly to consumers and homebuyers to educate them. They said shopping for title insurance made the process simpler.

What You're Buying

"What we heard time and again from the regulators we spoke to is that they think it's important consumer understand what they're buying and who they are buying it from," Mitola said during the session. "They want consumers to have that information earlier in the process." But agents must communicate that information in a way that's clear to consumers and not use industry jargon. Korsmo said agents need to use specifics such as child support liens and income tax liens, terms consumers can relate to instead of vague slogans such as "protecting the American dream."

Collateral vs. Investment

"To your lender, you talk about protecting the investment in the collateral of the mortgage. To the homebuyers, you're protecting their investment in the property. Talk in terms of specifics," she said. "The three recommendations I always give are: Early education makes all the difference. Talk about it from the perspective of the consumer. And the title industry must do the educating, and that includes educating our professional partners. It also means making sure your partners understand the title insurance policy process.

"Title insurance is a really fantastic thing. This industry is truly the unsung hero of real estate. The work they do allows the consumer to buy a home at a low interest rate because of their ability to minimize the risks on the collateral on those loans. I've always wondered why homebuyers can't see how great this is. That early education component was the ‘ah-hah' moment."

Passaic Valley Title Service, Inc. is an independent, full service title insurance agency serving all of New Jersey.