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Best Practices

Ensure You Have Proper Insurance to Protect Everyone’s Funds

March 21, 2013

By Garry Wolff

In these days, every title order counts and everyone is vigorously competing for the next order, with many title companies claiming to provide their customers and the ultimate consumer with quality service.

So, what is quality service? It’s understood that quality service can be viewed and defined in many ways; however, the underlying principle remains constant. Quality service is only achieved when a company meets or exceeds its clients expectations.

Now, due to the nature of the title industry’s business—which includes closing/escrow services, the handling of substantial money and providing professional services—possessing the necessary business insurances that will adequately protect the title company and its clients. These should be fundamentally included when defining one’s quality service.

If you question whether protection should be an element of quality service, then please take a few minutes and ask several real estate professionals and consumers if they would mind doing business with a title company that didn’t have the necessary business insurance to protect everyone’s money and safeguard their real estate transactions. What do you think their responses and expectations are going to be?

It was surprising to learn after reviewing “The First Title Agent Licensing Manual,” published by Mandrien Consulting Group in 2011, that many states do not require a licensed title company to possess much, if any, form of business insurance. I was equally surprised after reading The Title Report’s 2011 special edition “Voice Of The Title Agent,” that many title companies actually do not possess the necessary business insurance needed to adequately protect themselves, their customers and the ultimate consumers. It was quite apparent that many title companies didn’t understand the requirement to meet or exceed the expectations of their clients and the ultimate consumer when they defined what “quality service” meant to them.

Such protection can be accomplished by acquiring an adequate amount of fidelity, crime, general business liability, professional liability and any other form of insurance that will provide sufficient protection to all parties to the real estate transaction. Remember that consumers are entrusting a title company with their monies and their largest single financial investment —their home. Likewise, real estate professionals (i.e., real estate brokers and mortgage loan originators) are relying on a title company to protect their livelihood.

Now that you understand that quality service is inclusive of various financial and professional protections that everyone expects, let’s move our attention to a marketing strategy that will effectively communicate and promote your company’s quality service over your competition

Developing a marketing strategy based on quality service must integrate a new dynamic of actually selling your services to a real estate professional who typically has no fiduciary responsibility in looking out for the consumer’s best interests when recommending a title company. When marketing your company’s quality service, it’s important to communicate effectively and promote the differences in a manner that will cause a real estate professional to question if everyone’s money is protected and if the real estate transaction is safeguarded to everyone’s benefit, including the real estate professional’s interests.

Your company’s marketing material and website should promote and show evidence of your business insurance, which should be used to create an obvious question and concern in the minds of real estate professionals so they will compare the differences with their recommended title company. In addition, your messaging should also promote your business insurance to your customers and the ultimate consumer in re-establishing the value of your company and the services provided by the title industry.

A word of caution: Be aware that many title companies may not carry the necessary business insurance and may try to stand behind the protections afforded by a Closing Protection Letter (CPL) issued by their underwriter, if the use of such CPLs are permitted by state law. In addition, some states may have a statutory guaranty fund established to protect the insured.

It should be noted that many CPLs and state guaranty funds may be limited in their protections/assurances and should not be relied upon as a substitute for the title company’s primary business insurance.

The title industry continues to be exposed to a financial nightmare of fraud, theft and agent defalcations. The industry is now aggressively trying to remedy the situation by educating title companies on how to better protect themselves. Likewise, the industry also needs to focus on how title companies can better protect their customers and the ultimate consumers by incorporating a re-defined version of quality service.

In summary, if your company already has the necessary business insurance in place that’s great. If so, go out and promote your quality service over the competition. If not, call up your insurance broker and get the necessary coverage so you too can offer quality service.

Garry Wolff is owner of TI Services LLC, a title insurance consulting and services provider. He can be reached at gswolff@tiservicesllc.com or 303-795-1667.



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