I received a query today on Title Insurance Talk that I’d like to share here.

First, I guess I need to explain how I run the Title Insurance Talk blog. It’s always been a consumer facing blog, meant to help the general public understand title insurance. Early on I noticed that search engine hits were usually in the form of a question, so I decided to just start answering their questions…verbatim. Most of the queries received on the site now have all been answered. The blog’s like a little title book sitting in cyberspace. Queries that create fodder for a new post are always a pleasant surprise.

It’s kinda fun because I don’t really explain how the queries work, but people figure it out. I usually interpret more than one hit with thesame query as a “hey do you hear me?” kinda thing.

Today’s query came from New Delhi, India. The query hit three times. Is outsourcing title insurance illegal? Given the source of the query, I answered it this way.

“That’s an interesting question. As a reminder, I am not an attorney and this is my opinion as a title agent and one who has been in the real estate industry for over 30 years.

I do not think outsourcing core services of title insurance is illegal in and of itself. The possible illegalities reside in issues like duplicative effort and whether or not settlement service providers are truly performing the core services for which they are being paid.

Outsourcing is a bone of contention in our industry for two reasons.

Outsourcing is part of the structure that supports sham title agencies. Underwriters use outsourcing to keep their costs down so they can provide cheap or free services to agents who are unwilling or incapable of performing core services in a title insurance transaction.

In addition, outsourcing, especially when the work is outsourced to a remote location, guts the expert examination which traditonally was the core of a title insurance purchase and reduces the title insurance coverage to the level of a casualty product.

Let’s compare it to a medical examination and surgery. In the US, we have a regulatory structure and litigous atmosphere which has raised the costs of care beyond what some are willing or able to pay. A terrific alternative has been made available in India. Consumers of medical services can travel to India and obtain treatment that is top notch and the cost is less than they would have incurred in the US. In that case, it’s not really outsourcing, but I’m trying to use an example of a consumer reaping a benefit from the use of expert services from a remote location.

Now, let’s say instead of going to the medical expert in India, the consumer used an on-line system like WebMD to diagnose their illness or maybe sent a blood or stool sample to a remote service and received a diagnosis that came with an insurance policy which said medical expenses would be paid if they missed something. You’d think that consumer was crazy because they most certainly should have seen an expert medical professional in person, right?

This is the medical equivalent of title insurance policies which do not include expert examination. Consumers have a hard time understanding what title examiners do, but we are diagnosing the condition of title. We’re looking for problems. Finding and curing problems before the insurance is issued is what we are being paid to do. The actual policy is just a safety net in case someone made a mistake. It doesn’t replace the examination.

I hope this helps with understanding the issue. I am taking a guess that the query might be a search for the truth. I respect that those who are performing the outsourced services are doing what they have been contracted to do. I wish you well. If you’d like to comment and have a dialogue I would welcome the opportunity.

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