The Abstracter-Agent Section Research Committee of ALTA® conducted its second annual Survey of Abstracter and Title Agent Operations during 1998, as directed by the ALTA® Strategic Plan. The overall objective of the effort is to develop and contribute to an on-going database of information that will help members to compete both inside and outside the title insurance industry in terms of attracting qualified employees in a tight labor market. This information should not only help members initial recruitment efforts, but should also assist in retaining those employees, since turnover in the industry tends to be high.
All ALTA® members who are title agents and/or abstracters were invited to participate. This year’s survey focuses on employee benefits, a topic not included in the 1997 survey. However, the 1998 results may be compared with the 1997 results on numerous business characteristics, including levels of staffing, types of business activities, revenue, operating expense, and payroll cost.
445 ALTA® members or almost 30 percent of eligible members responded to the 1998 survey.
Survey results were reported for four categories of annual revenue and four categories of numbers of employees. The distribution of responses between categories is similar to 1997 and is as follows:
$150,000 or less revenue 77 21%
$151,000-$500,000 146 39%
$501,000-$999,999 48 13%
$1 million or more 102 27%
1-2 employees 9%
3-5 employees 27%
6-20 employees 43%
20 or more 21%
A minority of respondents?16 percent in 1998 compared with 12 percent in 1997?did not report annual revenue. Companies that did not report revenue are more or less evenly distributed across the four categories of employee size: 19 percent of those with one to two employees, 21 percent of those with three to five employees, 13 percent of those with 6-20 employees, and 15 percent of those with 21 or more employees. Number of employees may be as good a measure of size of company as revenue; both breakouts should be studied before concluding there is a significant difference in some practice or characteristic between larger and smaller companies.
Survey responses related to business characteristics are also reported by geographic region, based on U.S. census regions. The geographic distribution of responses in 1998, reported below, is similar to the distribution in the 1997 survey:
New England (ME, NH, VT, MA, RI, CT) 1.8%
Mid-Atlantic (NY, NJ, PA) 6.1%
South Atlantic (DE, MD, DC, VA, WV, NC, SC, GA, FL) 3.6%
East South Central (KY, TN, AL, MS) 1.8%
East North Central (OH, IN, IL, MI, WI) 26.1%
West North Central (MN, IA, MO, ND, SD, NE, KS) 28.5%
Mountain (MT, ID, WY, CO, NM, AZ, UT, NV) 12.6%
West South Central (AR, LA, OK, TX) 12.2%
Pacific (WA, OR, CA, AK, HI) 7.2%
Description of Responding Companies
The response includes 267 companies (60 percent of the total) whose business activities include both title insurance and abstracter activities. Another 30 percent report they are title agents only; ten percent report they are abstracters only. Among all 445 companies responding, more than 80 percent provide escrow and/or closing services while among the title agents, almost all provide escrow/closing services. (See Table 1a, page 19)
The response is divided between C corporations and subchapter S corporations. Companies with annual revenue of $150,000 or less tend to be organized under subchapter S. Larger companies are almost equally sub-S and C corporations. Sole proprietors account for 8 percent of the response, including 22 percent of companies with revenue of $150,000 or less. The newer form of incorporation-limited liability corporation-accounts for 3 percent of the response, and conventional partnerships account for another 2 percent.
Only 15 respondents, almost all in the smaller revenue and staff size categories, did not report type of company.
More than one-third of respondents wrote business for only one insurer in the past year. While the majority of companies wrote business for two or more insurers, most smaller companies wrote business for no more than two insurers. One-fourth of the largest agencies indicated they wrote business with four or more insurers in the past year.
Among companies writing business with two or more insurers, the majority placed at least one-half of their business with their primary insurer. However, among larger agencies, those with more than $500,000 annual revenue, approximately one-fourth of respondents placed less than 50 percent of their business with any one insurer.
Only 10 companies among the 445 survey participants reported that a title insurer had an ownership interest in their company. At least one of these 10 appeared to be a small office (with only two full-time employees) wholly owned and operated by an insurer. Among the other nine companies, insurers owned an average of 47 percent of the business. Only 5 percent of respondents reported that they are affiliated with another real estate service provider. Among agencies with $1 million or more revenue, 10 percent are affiliated with another real estate service provider. These other service providers are primarily realty/brokerage firms and/or provide lending and financing.
Size of company closely corresponds to the combined population of the county or counties in which a company has offices. (See Table 3a, page 20) For example, among companies with $150,000 or less in revenue, one-half of the relevant county populations are 12,000 or fewer people. At the other end of the scale, among companies with $1 million or more revenue, one-half of the relevant populations are 300,000 or more people. Among all survey participants, one-half have offices in a county or counties whose total population is 47,000 or fewer people. Among the largest agencies, however, the average combined county population is more than 1 million people.
More than one-half of all survey respondents also conduct business in counties in which they do not have an office. Among companies that conduct business in these other counties, however, one-half derive 15 percent or less of their overall business from counties in which they do not have an office. Almost one in five companies conducting business in counties in which they do not have an office does more than a quarter of their business in these other counties.
Of the 7,585 employees reported to the survey (including those who work five days as well as those who work fewer days a week) 2,930 are in their 40’s and 50’s. The largest group, however, another 4,199, are in their 20’s and 30’s. More than one-fourth of the respondents, including more than one-half of the largest agencies, reported they have a full-time attorney on staff. Another 8 percent of respondents, mostly smaller agencies, reported they have a part-time attorney on staff.
Two-thirds of respondents provide health care coverage for their employees. (See Table 5a, page 24) One-third provide a health care benefit for employees only; another one-third provides employee and dependent benefits. Although one-third of those with at least one type of health care plan have a traditional indemnity plan (typically fee for service), the predominant type of plan is a Preferred Provider Organization, a type of managed care where employees must obtain service from or through a network of providers in order to benefit from plan-specified rates. Both monthly premium costs and costs of services provided by a PPO are typically less than traditional fee-for-service plans under which employees are free to choose any service provider. One-fourth of respondents with health care benefits reported an HMO. In almost all cases, employers with a health care plan allow all employees with six months or more service to participate.
The great majority of employers pick up the entire cost of employee participation in the health care benefit plan. Not all companies that sponsor plans that cover dependents pay toward the cost of providing dependent benefits. Of these 152 companies, 111 reported that they pay some of the cost for covering dependents. However, among those that do pay toward the cost of including dependents in the plan, the average contribution is 72 percent of the monthly premium or HMO fee.
Annual deductibles, for plans other than HMOs, vary widely. Overall, the average annual deductible for an employee or other covered individual is $472. This average is skewed by a relatively small number of higher deductibles. One-half of the deductibles reported are $306 or less. The "family" deductible (the combined annual deductible for employee and dependents) averages $1,007. Again, this deductible is skewed by a relatively small number of higher amounts. One-half of the reported deductibles are $650 or less.
Co-insurance, the employee’s share of each covered medical expense, averages 19 percent. In HMO’s, the co-payment for services averages $12 per service.
In the insured health care benefit plans, the lifetime maximum benefit for an insured individual is typically $1 million.
Approximately 45 percent of the companies that provide a health care benefit plan also provide a dental benefit plan or coverage. These dental plans typically include both employee and dependents, with the company paying all of the premium for employee coverage and either nothing (38 percent of those reporting) or an average of 73 percent of the premium for dependents’ coverage.
Among the organizations that reported health care benefits, 18 percent provide vision care benefits. More than one-half of the vision care coverages are limited to employees only and do not include vision care benefits for dependents.
Group Life Insurance
More than one-half the responding companies, 249 of the 445, provide group life insurance to their employees. Most of these plans provide a flat amount of coverage, typically either $10,000 or $20,000. Among the larger companies reporting, more than 20 percent provide a life insurance benefit that is a multiple of salary, typically 1 x salary.
In almost all cases, the company pays 100 percent of the premium for the employee’s group life insurance. Among all survey participants, 28 percent reported AD&D insurance benefits for employees, with most of these accidental death and dismemberment coverages matching the underlying life insurance benefit.
Income Protection While Sick or Injured
One-half of the companies responding to the survey provide paid sick leave to employees who are ill or injured. Another 16 percent provide paid-time-off, a program that typically combines paid-time-off for both sickness and vacation. Relatively few companies reported short-term disability (12 percent) or long-term disability (16 percent) plans.
Almost 30 percent of respondents, including slightly more than one-half of the agencies with $150,000 or less revenue, reported any type of income protection benefit. Almost all of the agencies with revenue of $1 million or more have at least one type of benefit plan.
Almost all companies reporting pay sick leave from the first day of absence.
Among the relatively few, mostly larger companies that reported a short-term disability plan, the waiting period for benefits varies from none to 6 days (typically STD plans in lieu of a sick leave plan) to 1 week to several weeks. Less than one-half of companies with an STD plan reported that employees are required to use all available sick leave before receiving STD benefits.
The maximum number of days the short-term disability benefit will be paid averages 131 days. The STD benefit is typically two-thirds or 60 percent of pay. Only a handful of respondents reported a maximum daily STD benefit, averaging $120.
Among the 70 companies that reported a long-term disability plan, the typical waiting period for benefits is three months. The LTD benefit is typically two-thirds of pay or 60 percent of pay. Only two companies reported a maximum monthly LTD benefit; this common benefit parameter may not have been readily available or well-known to most respondents.
More than 40 percent of surveyed companies reported a 401(k) savings or retirement plan among their employee benefits. Among companies with $1 million or more revenue, 81 percent reported a 401(k) plan.
Cash Awards and Bonuses
Cash awards and bonuses are common among the surveyed companies. At least three-fourths paid out some form of cash award in the last year. Typically, these cash bonuses or awards went to most full-time employees. All 445 respondents reported an average of 18 employees who work five days a week. Among the companies reporting that one or more employees received a cash bonus or award in the last year, an average of 17 employees received this cash.
The total amount of cash paid out in the form of bonuses and awards in the past year averaged $3,381 among companies with $150,000 or less revenue and $78,644 amount companies with revenue of $1 million or more. Among companies with three to five employees, the total amount paid out in the past year averaged $5,500; among companies with 6-20 employees, the total amount averaged $16,853.
Only a handful of companies, 5 percent of those surveyed, provide deferred compensation to top executives, including 3 percent who provide such compensation only to the chief executive officer. This deferred compensation is typically in the form of a tax-sheltered annuity or life insurance under Section 79 of the IRS code.
Paid Holidays and Vacations
With 372 of the 445 companies reporting, employees are enjoying an average of nine paid holidays in 1998. However, only two-thirds of companies with revenue of $150,000 or less reported any paid holidays. Two-thirds of surveyed companies provide paid vacation for their employees. Another 21 percent provide a paid-time-off program, which typically combines paid time off for sickness and for vacation into one leave plan. Approximately 10 percent of all respondents, but including more than one-half of companies with one to two employees, do not provide paid vacation.
Tuition Assistance Programs
Approximately 20 percent of surveyed companies, but including 36 percent of the larger companies, provide tuition assistance to their employees. Most of these programs limit assistance to college courses related to the current job or to courses related to any job in the company.
Forty percent of the larger companies and 16 percent of all surveyed companies provide some form of flexible benefits, including formal cafeteria plans. Most of these flexible plans allow employees to opt out of the health care benefit plan. A relatively few programs, mostly among companies with $1 million or more revenue, allow employees to maintain flexible spending accounts (FSAs) with which they can pay medical expenses with pre-tax dollars of pay. Only two companies reported that their programs allow flexible spending accounts for dependent care expenses.
Revenues and Expenses
Median revenue in 1997 among the 373 companies that reported their revenue was $400,000. (See Table 6a, page XX) Average revenue, skewed toward the high end of the distribution by a relatively small number of the largest companies, was $1,225,000. Among companies with one to two employees, average revenue was $114,000; among companies with three to five employees, average revenue was $194,000. Average revenue was $591,000 among companies with 6-20 employees, and revenue averaged $4,325,000 in the group of companies with 21 or more employees.
Among the 313 companies reporting, operating expenses in 1997 averaged $1,069,000, approximately 80 percent of revenue. One-half of the 313 companies had operating expenses of $339,000 or less. Payroll among 307 companies reporting averaged $603,000 in 1997. One-half of these companies had a payroll of $200,000 or less.
Title Policy Issues: Alternative Products
Although more than one-half the surveyed companies do not offer any products that lenders accept in lieu of a title policy, a significant minority, 42 percent of the 445 companies, reported that they do offer such products. (See Table 8a, page 28) These 186 companies offered such products in the past year primarily for homeowner refinancing although 20 percent offered them for home purchases and 41 percent offered them in connection with other transactions, such as second mortgages, equity lines of credit, and bridge loans.
Among the companies reporting, these "alternative" products were used in approximately 19 percent of all relevant transactions in the past year. Asked how they describe the products that lenders accept in lieu of a title policy, most responded that these products are "title reports," "certificates of title," " title and lien searches," and "opinions of title." Other more creative descriptions conveyed essentially similar products: for example, "owners and encumbrance report."
Among all companies surveyed, at least 40 percent believe that their competitors are offering products that lenders accept in lieu of a title policy. They reported these products are being offered in connection with homeowner refinancing (59 percent of those reporting), in connection with home purchases (22 percent), and in connection with other transactions such as second mortgages and equity lines of credit (36 percent).
Although "certificates of title" is probably the most common label for these products, a number of respondents mentioned the Norwest TOP program. Indicative of the strong negative emotions these products evoke, some respondents described them as "junk," "cheap," and "cheap and limited liability."
Judging from their comments, it appears that many company executives feel pressured by competitors "giving services away for free" and providing a less complete (and cheaper) version of a service that both companies offer.
Author Bilbrey is vice president, Warranty Title and Abstract, Inc., Reno, OK, chair of the ALTA® Altstracter-Agent Research Subcommittee, and a representative on the Board of Governors. Author McCarthy is ALTA® director of research.