Do you want to start a title insurance company? If YES, here is a detailed guide on how to start a title insurance company with no money and no experience.
It is the job of a title insurance business to ensure that the title to a piece of real estate is legitimate and then issues title insurance for that property. Title insurance protects the lender and/or owner against lawsuits or claims against the property that result from disputes over the title.
These businesses also maintain escrow accounts that contain the funds needed to close on the home, to make sure that this money is used only for settlement and closing costs, and they may conduct formal closing on the home. At the closing, a settlement agent from the title company will bring all the necessary documentation, explain it to the parties, collect closing costs and distribute the monies.
A title insurance business also ensures that the new titles, deeds and other documents are filed with the appropriate entities. It is important to state that a title insurance business has to make sure a property title is legitimate so that the buyer may be confident that once he buys a property, he is the rightful owner of the property.
To ensure that the title is valid, the title company will do a title search, which is a thorough examination of property records to make sure that the person or company claiming to own the property does, in fact, legally own the property and that no one else could claim full or partial ownership of the property.
Have it in mind that during this title search, the venture also looks for any outstanding mortgages, liens, judgments or unpaid taxes linked with the property, as well as any restrictions, easements, leases or other issues that might affect ownership.
This business is very exciting if you have technical knowledge of the insurance industry coupled with love for real estate.
Steps to Starting a Title Insurance Company
1. Understand the Industry
Reports have it that this industry has expanded substantially due to strengthening macroeconomic conditions. Businesses in this industry depend extensively on both the volume and value of domestic real estate transactions, given that the issuance of a title insurance policy needs a real property purchase to take place.
Statistics has it that strong growth in existing home sales and the house price index have helped growth in the industry. Experts believe that over the five years to 2022, industry revenue will continue rising and growing home sales and better access to credit will result in strong revenue growth.
You need to note that the distribution of businesses in the Title Insurance industry is mostly dictated by population trends and any regional differences in the volume of real estate transactions. Consequently, the majority of the industry’s establishments are located in the West, Southeast and Southwest regions of the country.
The West region is expected to account for 29.5% of the industry’s total establishments, growing pass its share of the population, which is expected to reach 17.3% in the same year. California dominates the region, accounting for 19.9% of the industry’s total businesses on its own.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
Without doubt, a title company is very necessary in the home buying process. In this business, you will have to help clients by searching public and real estate records for information about a property. You will also provide information on who has the right to sell a property, and if there are any judgments or liens connected to it. Then you will issue title insurance to protect owners in case someone challenges the sale of the property.
Note that this business is very good for individuals who are detail-oriented, good with numbers, like having a flexible work schedule and are highly motivated. Your prospective customers in this business are usually homeowners, but they may also be other businesses.
3. Decide Which Niche to Concentrate On
It will be a lot easier for you to start this business if you have a law degree and/or many years of experience in real estate. But if you are new to the real estate field, you would be better off working for a title company for a few years before starting your own. Note that working for a related business, such as an escrow company or a lender, may also provide valuable guidance.
Businesses in this industry underwrite (i.e. assumes the risks of and assigns premiums for) title insurance, which protects the policyholder from financial losses from defects in a real property title and from the inability to enforce a mortgage lien.
This business has no known niche but you can offer specialized-market-research-reports services to differentiate yourself and narrow down your services. These services may include:
- Underwriting title insurance
- Providing title search services
- Providing title reconveyance services
The Level of Competition in the Business
A lot of big US-based companies provide title insurance in Europe and in countries such as Australia, Canada, Mexico, and India, often for US buyers and lenders. But then the reliability of government systems of land registration reduces the market for title insurance in countries other than the US.
It’s very important to state that the European title insurance market amounts to about only 1% of the US market. The US has no single, comprehensive system of land registration.
The US title insurance industry includes about 3,900 establishments with combined annual revenue of about $14 billion. Experts believe that home sales and mortgage refinancing are the key drivers of demand for the title insurance industry. You need to understand that the profitability of individual companies rely on efficient operations because of the large volume of transactions.
Big companies in the industry gain from economies of scale in access to large accumulated databases of property records, whilst smaller ventures can mainly compete by specializing in nonstandard titles or in geographical regions that the large companies don’t cover. The US industry is highly concentrated: the 20 largest companies account for about 95% of revenue.
The title industry is highly dependent on real estate markets, which, in turn, are highly sensitive to mortgage interest rates and the overall economic well-being. Reports have it that as the surge in real estate transactions went up, the title insurance revenue grew.
According to reports, the industry paid out about $908 million in claims, about 8.1% percent of the $11.2 billion taken in as premiums in 2012. In many states, the price of title insurance is regulated by a state insurance commission.
In these states, the rate for the insurance premium cannot be controlled by the industry. Unlike other forms of insurance (such as life, medical, or homeowners), title insurance is not paid for annually, as it has one payment for the term of the policy, which is in effect until the property is resold or refinanced.
4. Know Your Major Competitors in the Industry
- Fidelity National Financial
- First American Title Insurance
- Old Republic National Title
- Stewart Title
- First Canadian Title
- Secure Legal Title
Understanding this industry is the key to building a successful business. The cost of title insurance has two components: premium charges and service fees. The title insurance premium rates are based on five cost considerations, including those related to:
- Maintaining current title information on property local to that operation, i.e., title plant
- Finding and examining the title to subject properties
- Resolving or clearing defects to title
- Covering title defects
- Allowing for a reasonable profit
Just like the rates for other forms of insurance, rates for title insurance are regulated by state governments to make sure that premiums are not excessive, inadequate or unfairly discriminatory to the public. Reports have it that States have different methods of regulating title insurance rates. The types of rate regulation used include:
- Promulgation: State regulatory body sets the rates. An example is Texas, where rates are set after comprehensive hearings each year.
- Use and file: Insurers set rates that can be charged immediately, as long as the new rate schedule is filed with the regulatory body.
- No direct rate regulation: Insurers set rates that can be changed at an insurer’s discretion. Even in this apparent unregulated situation, a regulatory body still is charged with overseeing the title insurance industry and can question the propriety of a rate that appears to be unfairly discriminatory or otherwise violates statutory standards. Examples are Illinois, Georgia and Massachusetts.
- Prior approval: Insurers propose rates, which must be reviewed formally and approved explicitly or deemed approved by the regulatory body before they can be charged.
- File and use: Insurers set rates, but they cannot be charged until the regulator has been notified and allowed time to review and carry out action, if necessary. While in some prior-approval states, almost the same result is achieved through a so-called deemer provision. Under a deemer, rates proposed by insurers are deemed approved if the regulatory body takes no action to disapprove a filing within a specified time, and the filer notifies the state that the rates are being deemed approved.
In some states, the regulated premium charge may not include part of the underwriting costs necessary for the process. In those states, title insurers may also charge search or abstracting fees for searching the public records, or examination fees to compensate them for the title examination.
These fees are usually not regulated and in those cases may sometimes be negotiated, while in some states, the regulation provides that the title insurer base its policy on the opinion of an attorney. The attorney’s fees are not regulated.
They are also not part of the title insurance premium, though the title insurer may include those fees within its invoice as a convenience to the attorney rendering the opinion. Have it in mind that the fees for closing a sale or mortgage transaction are not regulated in some states though the charge for closing may appear in the invoice disclosing the total charges for the transaction.
5. Decide Whether to Buy a Franchise or Start from Scratch
There are a lot of captive and independent agencies selling title insurance in the united states. This industry is indeed competitive and will continue growing as people continue to invest in real estate due to the growing population.
As a captive agent, you will have guidelines regarding what you can write and when. Independent agencies are allowed a little more flexibility and franchising is a viable option once you’ve made a name for yourself in the insurance community.
You need to note that one of the key motivators for owning a franchise is that it allows you to go into business for yourself, but not by yourself. You will be buying into a proven Business model and making use of an established brand with a built-in customer base.
But then have it in mind that franchising is not for everyone. Although you are an owner, you must give up some independence. And it needs a significant capital investment to get started. You also need to understand that instead of reinventing the wheel, a franchisee gets a lot of support from the franchisor right out of the gate, offering a better chance for success. A franchise owner often receives help with:
- Grand opening programs to jump start the business
- National and regional advertising to grow sales
- Routine business operations to maintain best practices for optimal efficiency
- Financing to cover initial franchise fees plus start-up costs
- Training to learn the business and proven operational methods
- Access to bulk purchasing agreements from approved vendors to hold down operating expenses
- Ongoing supervision and management support if you run into problems or have questions.
- Site selection for optimal traffic with consideration for locations of competitive businesses
- Design and construction of physical facilities
6. Know the Possible Threats and Challenges You Will Face
Have it in mind that as easy as this business might be, it is still a challenging work. In a competitive industry that’s changing rapidly, the obstacles are numerous with each coming trend. The challenges of starting your title Insurance business may include;
- Startup costs
- Adapting To Digital marketing strategies
- Gaining expertise
- Industry legislation
- The economy
- Getting licensed
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
As an entrepreneur, you must know that the legal entity of businesses mostly depend on the size and scale of the business. Have it in mind that since insurance business generally is all about the income and property of your clients, the LLC is the best legal entity for your business be it small, medium or large. You need to note that the benefits of establishing an LLC typically outweigh any perceived disadvantages. They may include;
- Increased credibility
- Limited compliance requirements
- Untouched assets
- Simple management structure
- Little or no restrictions
8. Choose a Catchy Business Name
- One Title Insurance
- Quilon Insurance
- Set Insurance
- One Trust Insurance
- Force Title Insurance
- Window Insurance
- Clean title Insurance
- Capitol insurance
- Magnet insurance
- Slate insurance
- A+ insurance
- Concord insurance
- Metro insurance Inc.
- Fancy Insurance
- Cross Town Insurance
- River Boat Insurance ltd
- Seashore Insurance
- Sun Insurance
- First American Insurance
9. Discuss with an Agent to Know the Best Insurance Policies for You
First and foremost, you need to note that every State in the United States has its own set of insurance requirements. You just have to visit your state’s department of insurance website to see them. Note that title insurance companies generally must carry a fidelity bond and/or surety bond.
Surety bonds protect consumers and companies from fraud and they range in coverage from 10 percent to 20 percent of the title business’s net worth, and typically cost between $200 and $1,000. Fidelity bonds provide about $50,000 in coverage.
If you plan or necessarily need to hire an office or support staff you may also have to carry worker’s compensation insurance depending on your state and the number of employees you hire. Then you will have to secure a surety bond.
Note that a surety bond guarantees to pay one party, such as an insurance company, if you fail to meet your obligation. States require you to have a bond in the event of mismanagement. Its purpose is to protect your clients from you.
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
Title insurance agencies irrespective of the size are often privy to confidential client information. With such knowledge of sensitive information that is not only kept from the public, but also sometimes unknown to company employees, agencies receive equal responsibility of risks associated with letting confidential information leak. So to protect your business from costly mishandling of confidential client information, you need to do the following;
- Make sure digital content are protected adequately. Ensure confidential content is given to business employees on a need-to-know basis.
- Always consult a legal professional to ensure your bases are properly covered.
- Have Legal contracts and non-disclosure agreements
- Hiring team members who conduct themselves in a professional, loyal and discrete manner will abate the threat of a bragging.
11. Get the Necessary Professional Certification
It all depends on the state, but you may need to take a pre-licensing course and exam. The licensing exam will cover insurance regulation, general insurance concepts, title insurance principles, title exceptions procedures for clearing a title, and real estate transactions.
Note that your state’s department of financial services can provide a list of approved educational entities for your prescribed classes. Professional certifications on the other hand can be another way to improve your skill set to be recognized for your accomplishments. In a world of personal branding and marketing, any advantage that helps in landing a client is worth the effort.
- Certified Professional Insurance Agent – CPIA
- Professional Certificate In Insurance – APA
- Chartered Insurance Professional – CIP
- Certified Insurance Service Representative – CISR
- Certified Insurance Counsellor (CIC)
- Errors and Omissions (E&O) seminars
- Special Topic Seminars
- Online, Self-Study and Webinars
- Licensing Exam preparation
12. Get the Necessary Legal Documents You Need to Operate
Have it in mind that you can get information from your state’s Department of Insurance on title insurance business laws that apply specifically to your state. You should consult with an attorney to make sure you understand these rules and regulations.
Reports had it that a lot of states in this country have laws for naming your business. In general, naming laws disallow misleading or deceptive names, such as a name that implies your business is an insurance business.
In Utah, you must either include the words “Title Insurance Business” in the business name or state that your business is a title insurance business in communication and advertising materials. Also in Florida, you can’t include the term “Company” in your Business title=”business name” data-wpil-keyword-link=”linked”>business name.
You need to understand that all states in the United States have title insurance company operating licensing requirements. But if your business plan includes more than one location, state laws determine whether each location needs a separate license or if the license for the home office covers branch offices.
Always make sure either you or the person you hire to manage the business is a licensed and appointed title agent or an attorney in good standing with the State Bar Association.
13. Raise the Needed Startup Capital
Indeed not just the title Insurance industry, but all insurance businesses need specialized financing to support growth.
We can’t deny that fund is the sole elixir that helps in the formation of new businesses, and allows businesses to take proper advantage of opportunities to grow, employ local workers and in turn support other businesses and local, state and federal government through the remittance of income taxes. Note that the strategic use of financial instruments such as loans and investments, is the key to success of every business
- Personal savings
- angel investor
- Venture Capital
- Loans and grants
- Alternative funding source like Crowdfunding
14. Choose a Suitable Location for your Business
This business comes with a lot of challenges especially at the very beginning. You have to take care of issues like funding, staffing, developing a marketing strategy and ensuring that you have a viable product or service. But before you start your business, there is one important decision that must be made: where to start the business.
You need to have it at the back of your mind that a lot of features will affect what makes a location suitable or not for your title Insurance business, and a focused entrepreneur will examine those features carefully before deciding to move forward with a venture. A suitable location for your title Insurance business must have the following;
- Staffing needs
- Quality of life
- Access to marketing programs
- Access to clients and demographics
- Tax and legal incentives
- Office costs
15. Hire Employees for your Technical and Manpower Needs
The efficient use of technology will be of enormous advantage to the future success of your business. In this business, you have to stay current with the latest releases for your business management system. Don’t forget that your operating system, software and hardware should be up to date to enable efficient operation.
Supply your business to new company interfaces promptly and use electronic download from the company wherever possible to eliminate paper and improve efficiency.
You should also install Internet access on each business employee’s desktop with an always on, high-speed connection and an e-mail account for each person. Note that these steps taken together will make your business easy to operate. You will also need to focus on the security of your systems because the new functionality creates new risks that must be managed.
Note that clients in this industry are usually impressed with industry businesses that use the latest technologies. Not only is the business’s image enhanced, the business is positioned to meet consumer’s increased expectations. Don’t forget that clients will want to deal with agents that have the same technological capabilities that they have in their own homes and businesses.
It’s also important that you understand that technology allows an business to broaden its geographic reach, as a means of growing its business and serving the customer. It also permits agencies to streamline work flows, get work done more quickly, get answers from companies more quickly, and free up business employees to engage in productive work.
Normally you will feel tempted to start this business without the help of employees or experts. Unless you’ve decided to start out partnering with another business, don’t give in to this temptation. Have it in mind that you will spend much of your time marketing to your target audience and meeting with various insurance companies. Indeed you will be building important connections within the industry.
It’s also important to build connections with your prospective customers, while your staff handle the day-to-day interactions with customers. You will need to hire employees with industry experience. Apart for employees who perform strictly administrative tasks such as a switchboard operator, receptionist or secretary, you’ll need licensed personnel.
Note that these will include underwriters and any employees who work directly with clients. If you decide to hire an unlicensed person such as a new college graduate, most states provide a window of time for a new employee to get a state insurance license. You can also create a continuing education plan to make sure your employees meet state-mandated insurance license renewal requirements.
The Services Process Involved in the Business
As an entrepreneur looking to start an insurance business, you need to understand that well laid out processes are the key to success in your title Insurance Business. To be able to boost their profitability, agencies make investments all the time in people and technology, as well as in other businesses through acquisitions.
Indeed there are a number of process improvements agencies might consider. These processes include improving the workflow and standardizing processes so that when different people do the task, they aren’t reinventing the wheel each time.
But then have it in mind that successful agencies segment their accounts to know their most valuable clients so that they can then provide them a higher level of service than they give smaller revenue or less profitable accounts. Service processes for your prospective title Insurance business may include these listed below and a lot more.
- Employee Hiring Process
- Employee Training Process
- Telemarketing Process
- Claim Handling Process
- Policy Endorsement Process
- Billing Inquiry Process
- Customer Complaint Process
- Content Creation Process
- Sales Process
- New Business Process
- Referral Process
- Policy Review Process
- Social Media Process
- Search Engine Optimization Process
- Re-quote Follow-up Process
- Cross-selling Process
- Renewal Process
16. Write a Marketing Plan Packed with ideas & Strategies
You have to know that a well thought-out marketing strategy is a very important tool for success in any business venture. In the business world, your prospective clients have a number of options to choose from, which is why your marketing strategy has to represent your brand and help your business stand out from its competition.
Note that a proper understanding of your target audience will help you understand how best to reach them, so that you will know how to let them know why they should come to you and how your business can best fulfill their needs.
Indeed captive agents have the benefits of working with a carrier that has already made a name for themselves in the industry. A lot have found success through personalized mailers, ads in neighbourhood newsletters and school yearbooks, and radio advertisements.
As a new entrant in the title insurance business, you will sometimes represent carriers that aren’t as well-known. But then your ability to educate them will define your success. In addition to the marketing tactics of a captive business, independents should have a website that is informative and offers answers to the customer’s most burning questions.
You can market your business by sharing your knowledge on social media accounts and in strategically-timed television and radio advertisements. But no matter the path you choose to thread, participation in local and national business profiles such as Yelp and LinkedIn are always critical. It takes time to establish yourself as a leader in the industry. Start making a name for yourself now and it will serve you for years to come.
17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
Brand awareness is a trending topic in the business world these days. Brand awareness and corperate identity are what boost your business and maximizes your income. So you have put into deep thoughts every strategy available to you to transform your company name into something valuable and indestructible. Ways to do that for your title Insurance business may include;
- Sell lines of insurance that have higher premiums or offer a larger commission.
- Spend time keeping up with the latest in insurance trends and carriers. Only represent the carriers whose products you stand behind and would be willing to write for your own family.
- Allow your employees to work from home from time to time. This helps cut down on overhead expenses and sends a message to your staff that you trust them.
- Outsource departments that aren’t mission critical to the company’s core business. This includes accounting, marketing, and IT.
- Consider buying another agent’s book of business.
- Focus on cross-selling multiple lines to your current book of business