MINUTES
SENATE INTERIM COMMITTEE ON TITLE INSURANCE
Tuesday, February 10, 1998
10:00 am
Capitol Building, Room 2E.20
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Pursuant to a notice posted in accordance with Senate Rule
11.11, a public hearing of the Senate Interim Committee on
Title Insurance was held on Tuesday, February 10, 1998 in the
Capitol Building, Room 2E.20, at Austin, Texas.
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MEMBERS PRESENT: MEMBERS ABSENT:
Senator Chris Harris Senator Gonzalo
Barrientos
Senator J.E. Brown
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The Chair called the meeting to order at 10:05 am. There
being a quorum present, the following business was transacted.
Committee Rules were adopted by voice roll call of Senator
Harris and Senator Brown.
Lyndon Anderson, representing the Texas Department of
Insurance, testified on the issue of cost drivers, unregulated
expenses and rebating; difficulties of detecting and
regulating controlled business arrangements; controlled
businesses pass their costs to the consumer and unnecessarily
raise costs, reduce protections and create upward pressure on
rates to consumers; discussed needed reforms in this area.
Rob Carter, representing Dept. of Insurance, testified on the
issue of title rates in neighboring states and indicated Texas
is roughly in line; some states have not regulated title
insurance at all; some states vary rates based on items
included in pricing such as abstract fees, title opinions.
Merritt Hopson, representing Dept. of Insurance, testified
that the Department of Insurance needs more authority to stop
"sham" businesses, or to allow benchmark rates or downward
deviations on title insurance rates.
11:05 The following members arrived after the roll was
called: Senator Gonzalo Barrientos.
Rob Bordelon, representing the Office of Public Insurance
Counsel, testified on the issue that more statutes or
regulations may not be required; but more specificity in the
definition of expenses with a list of those specifically
disallowed; Art. 9.07(c) should be modified from current
position that 'presentation by any party shall not be limited'
to 'shall be "reasonably" limited' to prevent overly-lengthy
testimony presented to the Department of Insurance.
Dave Ginger, representing Title Insurance Company of America,
testified on federal regulations being discussed in Washington
and their possible impact on how states will be able to
regulate insurance practices at the state level.
Tom Rutledge, representing Texas Land Title Association
("TLTA"), testified that TLTA would like the present system to
continue in that it would not include a benchmark or deviated
rate schedule; there may need to be a catastrophe load factor
for home equity related expenses; the home office issue should
be addressed; the Commissioner of Insurance should be given
the authority to disallow targeted expenses; the TLTA will
have task forces reporting back on these issues; sham ticket
operations, if they become widespread, could have an upward
pressure on rates.
Dr. Samuel Hadaway, testifying on behalf of TLTA, testified on
the issue of rebate and feels the evidence does not indicate
widespread violations of rebate; regulated competition (as in
the title industry) will set a rate through industry standards
based on the market vs. a regulated monopoly (such as a
utility) which is a natural monopoly based on a service few
can offer; evidence of rebating should be dealt with as a
specific violation by the companies involved.
Nelson Lipshutz, representing TLTA, testified on controlled
businesses and the lack of evidence to indicate they are cost
drivers; "sham" agencies are not cost drivers as they
constitute only about 6% of the title businesses; "sham"
businesses would only become a factor if there were an
explosion of new businesses that would have a collective
impact on the industry; feels the industry should be regulated
through trade practices mechanisms and not through rate
regulations.
William A. Kramer, representing Republic Title/Title
Professionals Association, testified that controlled
businesses take two forms 1)"sham" and 2)legitimate; sham
ticket operations increase industry costs by replicating
services provided elsewhere; sham operations tend to go out of
business during economic downturns and weaken remaining title
firms; the title industry should be open to legitimate
controlled business arrangements that operate as actual title
firms.
12:25pm The Chair called a one hour recess.
1:30pm The Chair called the meeting to order.
Senator Brown finished questions directed to Mr. Kramer.
Steve Vallone, representing Texas State Title, testified that
all partnerships should not be categorized as controlled
businesses; his company is a shareholder supported agency
where all members share profits and loss based on their
percentage of stock in the company; some benefits occur from
vertical integration in the title industry.
The Chair thanked the members of the lobby that were
contributing suggestions to the Title Committee. Set the next
meeting of the Title Committee at the discretion of the Chair.
1:40 pm Adjourned.