After World War II, banks and other mortgage lenders began requiring
insurance to protect them against flawed or defective real estate
titles. Over the past sixty years, the title insurance industry has
grown steadily in size, power, and secrecy: policies are available for
both lenders and property owners and many title insurers offer an array
of other real estate services, such as escrow and appraisal. Yet details
about the industry's operational procedures remain closely guarded from
public exposure. In The American Title Insurance Industry, Joseph and
David Eaton present evidence that improvements in recordkeeping over the
last sixty years-particularly the advent of computers-have reduced the
likelihood of a defective title going unnoticed in a property
transaction. But the industry's flaws run deeper than mere obsolescence:
in most states, title insurers are allowed to engage in anticompetitive
business practices, including price-fixing. Among the findings in this
meticulously researched study are instances of insurers charging
premiums well above the amount necessary to compensate them for assuming
the risk of defect and identical policies with identical risk that vary
in price by hundreds of percentage points for different geographic
locations. The authors also examine the widely ignored role that the
federal and most state governments play in perpetuating the title
insurance industry's unfair practices. Whereas most private industries
prefer as little government intervention as possible, title insurers
welcome it. Federal statue exempts title insurers from anti-trust
liability, opening the door for price-fixing and destroying any
semblance of free-market competition or market power for consumers. A
landmark study for elected officials, and all those involved in the
insurance, real estate, and brokerage industries, The American Title
Insurance Industry brings to light a long-neglected problem-and offers
suggestions for how it might be remedied. Joseph W. Eaton is Professor
Emeritus of Economic and Social Development Studies at the University of
Pittsburgh. David J. Eaton is Bess Harris Jones Centennial Professor of
Natural Resources Policy Studies at the University of Texas at Austin.
