Chicago (February 7, 2023) - On a very cold winter morning last week a dynamic query arrived unexpectedly in my inbox; one I had been relishing for quite some time. I savored the newfound opportunity only briefly since the importance of the ear posing this examination was not lost on me for even a minute. I pecked out my full-throated response and hit "send" before reading it a second time. Here is a portion of that discussion:
Good morning Mr. Wahlen.
First let me thank you for taking the time from your busy schedule to attend the meeting and share your thoughts.
At the meeting, someone mentioned various options on a rate structure - a published rate / file and use / rate bureau. I’m not sure who it was, but, I thought it was you.
Can you share more details about each?
Which do you prefer and why?
Thank you for asking: I would be happy to answer (and I would happily be available for a live discussion either over the phone, zoom or in person, if you think that would be helpful).
Since this has been on our collective minds for quite some time, there was a fairly comprehensive discussions on the topic of legislative reforms to our industry posted here, published at the onset of our initial proposal, which includes a breakdown of the possible structures applied to rates. A rating bureau was decided as “best of” because of the balance of power allocated to underwriter, agent and regulator, with special consideration of the burden added to the regulator.
Improper inducement for referrals, regardless of their shape or style, including in the form of coercion or threat, are the scourge of our current environment. What has developed unimpeded is detrimental to the consumer, to our industry, and to fair competition. Our desire and appetite for comprehensive reform is really targeted simply at this scourge. If there was any form of reform less burdensome on everyone involved that captured, controlled and eliminated the improper inducement for referrals, we would welcome it.
If we agree that the current outline of our unique model elevates the title insurance product available to the consumer in Illinois, which fundamentally includes legal representation throughout the process, and I believe it does, born from the co-occurring synergy between legal representation and title fee sharing work, then our focus would exclusively be to extinguish improper inducements (including coercion).
One of the obvious infractions is overpayment (paying more than a fair split of collected premiums; which creates upward pressure on the cost to the consumer; not exclusive to Illinois); but just as important is the exchange of work performed for a fee. Chultem settled and memorialized the exchange, but the definition of “determination of the insurability of title out of which liability arises” was a foundational and reasoned principal that took many years to develop. The Department clarified the principal in 2005 in it’s Bulletin 1-05, which, you would think, would be easy to audit, monitor and measure. But alas, flagrant disregard for this foundational principle behind the exchange was breached many years ago and no one could figure out how to rein it in.
We have also seen the fight to capture control by chasing influencers upstream. The broker captive title agency is one example; of which there are many. This harms consumers by removing choice when choice would best be served with experienced representation.
While I don’t relish the impending overhaul through these radical legislative reforms, the current state of our stalemate has proven we can’t improve alone. These legislative proposals at the Association level at both IRELA and ILTA are our best approach. They attempt to frustrate if not extinguish upward pressure on costs, define and audit the exchange of work (with liability) for a fee, retain choice with representation, and keep our structurally sound practice of elevated protection for the consumer in place.