Senate committee hears heated debate over title-insurance "premium-for-risk" deals; bill sent to Judiciary

Senators on the Commerce and Labor Committee paused the final calendar to hear extended testimony on a proposal aimed at closing a practice known in the industry as "premium-for-risk" or title-splitting.

Sponsor Sen. Rose told the committee the bill would clarify existing law so that only properly licensed title insurers — not title agencies — assume the financial risk for title insurance, and that the settlement agency named in a purchase contract should have exclusive authority to issue the buyer’s policy. "This stops local title companies from promising to cover claims on insurance policies they did not issue themselves," Rose said.

Several local title-agency owners opposed the change. "By mandating the selection of one title agency for title insurance, the bill hands a competitive advantage to large operators with centralized operations," said Ryan Rafath, identifying himself as the owner of Windmill Title in Middle Tennessee. He argued the rule would favor out-of-area corporate operators and harm small, locally owned agencies.

Attorneys representing other title-industry stakeholders and consumer advocates countered the sponsor’s concerns. Carlton Germain said premium-for-risk agreements blur statutory distinctions and leave consumers exposed because the agencies making guarantees lack financial vetting and regulatory oversight. "Enacting this legislation will maintain transparency for the consumer and protect the buyer’s right to select a title agency and licensed title insurer of their choice," Germain told the committee. Jeff McAvoy, a real-estate attorney, added that sellers and buyers should know who is being compensated and that underwriters should be aware of such arrangements.

Committee members pressed for a fuller legal and policy review. Senator Stevens moved — and the committee approved — referring the bill to the Judiciary Committee so that members there can consider the legal mechanics and any necessary amendatory language before a final vote.

The referral will give the sponsor and stakeholders additional time to resolve concerns about competition, consumer protection and how the statute should treat split closings.