Previously, the author identified issues related to title insurance markets, including questions about the extent to which premium rates reflect underlying costs, oversight of title agent practices, & the implications of recent state & fed. investigations. This report addresses those issues by examining: (1) the characteristics of title insurance markets across states; (2) factors influencing competition & prices within those markets; & (3) the current regulatory environment & planned regulatory changes. To conduct this review, the author analyzed available industry data & studies, & interviewed industry & regulatory officials in a sample of 6 states selected on the basis of differences in size, industry practices, regulatory environments, & number of investigations.

The purpose of this paper is to examine barriers to entry in an insurance market wherein banks are an integral part of the distribution system: Title insurance. We draw some broad comparisons between the distribution channels used to sell title insurance and the entry strategy used by banks entering the property and casualty insurance market. Given that the title insurance industry is characterized by two major entry barriers, controlled business arrangements and title plants, we test different industrial organization growth models with barriers to entry to determine which model best describes the title insurance industry. The empirical analysis we present suggests that the theoretical model that explains more accurately the current title insurance industry structure is the Salop circular-city model. Our contention is that if banks continue their current trend of market penetration into the property and casualty insurance markets, the results presented herein could potentially offer an insight into the future structure of that market.