And a possible way to address the threat
When Title Agents were asked, in the “Voice of the Title Agent report 2018” by October Research/ The Title Report, to talk about what concerned them the most for the coming 12 months, technology did not feature at all in their Top 10 concerns. (Interestingly, the economy/mortgage market, cyber threats & operating costs were the op 3).
However, “new technology” was quoted as one of their best opportunities in the next 12 months (by over 30% of the respondents, the 2nd largest, after renewed sales/ marketing approach).
Inputs from the survey showed that Title Agents have heard a lot about impending technology that will dramatically change their business, but over the years have not seen it being implemented (Over 50% of the companies surveyed had been in business for 20+ years). Hence, they held the belief that technology is being adopted, but will significantly alter their business only in the longer term.
But title insurance generates $15 Billion of premiums per year and is dominated by just four large players (soon to become 3, with Fidelity potentially buying Stewart Title). These are the companies that underwrite the insurance, and who have either direct or affiliated title agents. And there is an even larger set of independent Title agents (roughly 4,200 according to ALTA estimates). These large numbers make it a great target for technology and InsurTech companies, who believe that a lot of the processes in the title industry are manual and prone to delays, and therefore ripe for disruption.
Who are the InsurTech entrants?
Technology start-ups are getting into the Title business in multiple ways.
Underwriting: In August 2018, the California regulator gave its approval to a start-up title insurer, States Title, to operate in California, one of the biggest states by population and for mortgage lending. States Title believes it can make the title insurance process far more efficient using data and by automating it. And similarly, OneTitle National Guaranty Company, another fintech in New York, is using technology to search public records faster, is bypassing title agents, and is willing to charge up to 25% lower premiums for title insurance policies in New York and New Jersey. These two are focusing on underwriting title insurance and issuing policies, thereby competing with the big 4.
Title Agents: Spruce Holdings Inc, an InsurTech which raised $15 Million from investors like Munich Re, on the other hand, wishes to function as one of the 4,200+ Title agents, and already operates in 36 states since starting in 2016. It integrates with lenders software, to provide seamless title search services to the originators from multiple underwriters, including WFG National Title and Fidelity. The technology, it’s APIs, helps not only to make lenders title ordering easier, but also provides the service at a lower cost, and with fewer errors. One of its investors commented, “We’re confident that Spruce’s approach will continue to resonate with lenders and innovative real estate models looking for a more efficient, technology-driven solution.”
Platforms: Some, like a start-up named Modus out of Seattle, plans to let its platform be used by real estate agents for title and escrow services, rather than a traditional title firm. Realtors and buyers/ sellers can track the closing on the company’s platform, to speed up closing and to lower the potential for fraud, by avoiding the use of email for the transaction. And realtors can also outsource any manual data entry related to the transaction to Modus.
Another startup from Seattle, JetCLosing, is a mobile-first title and escrow company, which is now licensed to operate in Washington, Arizona, Nevada, and Colorado. They offer the same services as a traditional title company – but claim to be faster and better, by eliminating paper forms, moving everything to the cloud, and charging a flat escrow fee of $500 to both sides for every transaction. They also issue owners and lenders title insurance policies.
Similarly, another InsurTech, Qualia, which has raised over $7M, provides cloud settlement software for streamlining the title and escrow process, and SafeChain, an Ohio-based startup, is building “peer to peer products for the title industry.” SafeChain has raised $100K toward a $1.2M debt offering.
What does this mean?
As we discussed, the surveyed Title Agents felt that although technology is available and probably being implemented, it will be a while before it will directly affect their day-to-day business. Not surprisingly, given the current progress of InsurTechs and the lower penetration of technology in the Title Insurance space, and the nature of the ‘relationship-based’ title insurance business, even analysts feel that any real disruption from InsurTechs is quite far away. But that does not mean that disruption is not on its way. We have seen this in many industries – disruptive changes seem to work on the periphery and be gradual until a critical mass is reached. Then new technologies and new methods of doing business simply catch up after starting slowly and quickly overtake traditional players who have not readied themselves to handle the emerging changes in their business.
Our take on this is simple – if there is not much cost or resources required to start the transition and prepare for the upcoming technological changes, then ‘traditional’ title agents should start preparing and understanding the future market. So how can they do this without spending time and resources on these emerging technologies? By simply partnering with tech providers, or service providers of, say, title searches, who may already be investing in cloud-based title search platforms, online databases, Robotic Process Automation (RPA), Data management and analytics, and similar technologies that will drive the next wave of change for Title Agents and their business.
Coforge BPS, with its 3,400 global professionals servicing financial services industries since 2001, aspires to be one of the world’s best technology product and solutions company and is enriching the business experience of its customers every day. Its portfolio of technology-enabled products and solutions for the title insurance property tax, banking, mortgage, and insurance industries, includes SmartProp(R), a technology-enabled solution for fast and accurate property title search reports and SmartTrak(R), a technology-enabled solution for property tax reports, certificates & municipal lien searches.