Magazine article American Banker

N.Y. Lawmakers, Title Group Spar on Public Option

Magazine article American Banker

N.Y. Lawmakers, Title Group Spar on Public Option

Article excerpt

Byline: Brad Finkelstein

If a pair of New York legislators had their way, the state would emulate Iowa and create a state-run title insurance fund.

Assemblyman Richard Brodsky and State Sen. Eric Adams say this "public option" would reduce premiums, fund affordable housing and road and bridge repairs and enable property tax cuts statewide.

Not so fast, responded the American Land Title Association.

"It is dangerous for a state government to look to a highly cyclical industry to fund critical infrastructure needs such as roads and bridges," said Kurt Pfotenhauer, the lobbying group's chief executive. (He is a former chief lobbyist for the Mortgage Bankers Association.)

"What will the state do when their state-run title insurer needs money from the state instead of providing funding for key projects?"

The state legislators cite figures that claim that New Yorkers paid $1.2 billion in premiums in 2007 and that the title insurers paid out just $55 million in claims.

A white paper the lawmakers released this month said that about 80% of premiums are paid out for home or auto insurance.

"There is a single rate schedule for all title insurers, eliminating pricing competition and making it impossible for a homebuyer to shop for less expensive coverage," Adams said.

But the title insurer' group said the two legislators are making a mistake comparing title insurance against property and casualty insurance.

The insurers further argued that there would be up-front start-up costs and that the state would lose premium taxes paid by title insurers, which in 2008 totaled $15 million.

Also lost would be revenue paid for the purchase of public documents, the title insurers say. The trade group puts the nationwide figure at $170 million annually.

Supporters of the public-option concept also note that New York has a public option for workers' compensation policies. …

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