Digging for data

Abstract

In terms of technology, there are many opportunities for title insurers, since automation has not ranked high on their agendas. Title insurers continue to do what they have always done - unearth pertinent property facts. In providing insurance, the title company is saying there is a clear title, with exceptions enumerated, and that the chain of title and people that have passed through have a right to sell a property. Research must not only be done accurately but quickly. One way to speed the research process is through use of number of data base services, such as TRW/REDI, that provide an index to microfilmed documents produced by a county recorder. While it would seem that faster service could result from the use of technologies such as imaging at the title plant and its branch offices, such modernization has not yet arrived in this segment of the industry.

Title insurers are the archeologists of the insurance world. They must dig deep into the past and systematically sift through mounds of public records on various real estate properties--just to be able to make an accurate underwriting decision. This is some of the most labor-intensive work in the property/casualty industry.

But, unlike workers who toil in the field of archeology, title researchers also must do their digging quickly and just as quickly send a report based on a title search to their customers--realtors, lenders, mortgage brokers, and escrow experts, among others. And although title specialists grapple with issues as complex as fraud, in the form of title forgeries, it's their approach to general business operations--research, data exchange, policy generation--that determines what kind of service they'll deliver to their customers. Increasingly, they are faced with deciding which technologies will be most effective in improving operations--and service.

In terms of technology there are a lot of opportunities for title insurers, since automation has not ranked high on their agenda. Paul Sakrekoff, systems committee chairman for American Land Title Association (Washington, DC) and MIS director at World Title Company, based in Burbank, CA, says, "Around 1990, I noticed that this industry was about 20 years behind everyone else in its technology utilization, When you look at what a company like USAA is doing in imaging and work-flow, and compare that with the title area, it's almost opposite ends of the spectrum," he says. But that state of affairs is changing and this will have a positive effect on the business, he says.

Meanwhile, title insurers continue to do what they've always done--unearth pertinent property facts. In many cases, the site at which they do their digging is the title plant, a hub that serves a particular county or region. This is the company's research center, where employees may access a database index to a microfilm library comprised of thousands of rolls of documents filmed from county recorders' records. It can be slow going for those who pull documents from microfilm to examine a chain of title.

Though most title insurers do heavy research work, there are differences among them. In fact, availability of title insurance, as well as the types and distribution methods, vary greatly throughout the United States. The title business is very much influenced by regional factors: States that don't see much turnover of property don't see much title business, says John Gilmore, vice president, director of information technology, at Fidelity National Title Insurance Company (Rancho Santa Margarita, CA). But where property changes hands frequently, he adds--as in California, Florida, or Texas--or there's a lot of refinancing, the title business is there to accommodate it.

Despite the variations, however, title insurers all are bound by the same covenant: to provide insurance that protects the owner of property or lender of money against unknown defects in the title to a property that are the result of a lien, easement, invalid will, inaccurate description of a property, and other legal defects.

In providing insurance, the title company is saying there's a clear title, with exceptions enumerated, and that the chain of title and people that have passed through have a right to sell the property.

What makes title insurers singular, notes Coopers & Lybrand's Bryan Shaul, a partner in the firm's Los Angeles office, is that "they are not insuring against a future event but against defects that have occurred in the past," before the effective date of a policy. And unlike other insurers, title companies cannot use actuarial tables to assess risk, so title research substitutes for number crunching, he suggests.

The fact that title insurance is historical is important from an information technology perspective, observes Fidelity National's Gilmore. While other insurers make decisions based on demographic statistics, our actions are based on the quality of information we have about the history of a particular property." Adds Shaul: "A title plant must be as current and up-to-date as possible and there must be sufficient internal controls in place to make sure a title search is done properly. Once you say a title is clear, your job is done." However, he adds, if there were a control problem, a tax lien or other defect might be missed, leaving the title open to challenge.

Research must not only be done accurately but quickly. One way to speed the research process is through use of a number of database services, such as TRW/REDI (Real Estate Data Inc.), that provide an index to microfilmed documents produced by the county recorder. Essentially, the index is an abstract that indicates the identity of buyers and sellers, plus other pertinent information, says Gilmore.

But such a tool is only the tip of the iceberg, in terms of a title insurer's automation needs. The present age of automation notwithstanding, some employees at a title plant, Gilmore notes, "may spend the entire day putting microfilm into machines and printing documents to be examined."

There's clearly a "need to get research done faster," maintains Kirk Knott, director of information systems at Old Republic National Title Insurance Company, in Minneapolis. The fact that business currently is up because of refinancings, and that title insurers have more orders to process, means they must work even harder to please customers, he suggests. "Lenders want a commitment on insurance, a title report, as soon as possible--they don't want excuses," he adds.

Service is indeed a big issue, agrees Gilmore: "From the time a customer calls a branch office to open an order, the insurer is preoccupied with how quickly a preliminary title report can be delivered. Here, technology has been whittling away at the turnaround time; it used to take seven days, then five days, and now it's down to about three. If someone could offer a 24-hour turnaround, that would be a competitive edge."

While it would seem that faster service could result from the use of such technologies as imaging at the title plant and the branch offices connected to it, such modernization has not yet arrived in this segment of the industry. At this stage, image is more a concept than a reality, says Gilmore. "We know about the cost savings and productivity gains, and we're headed in that direction." The big obstacle, he explains, is that there are thousands of documents recorded each day in various counties around the country. Moreover, "for a library of documents now in microfilm to be viable in image form, I'd need 10 to 15 years of storage at my disposal, unlike other areas of insurance. The biggest cost would be getting documents off microfilm and onto optical disks." Political considerations also crop up, Gilmore notes: "Some county recorders are digitizing documents in addition to filming, but digital images are still iffy in terms of court approval."

Image is not the only advanced technology in which title companies are interested. EDI is considered a tool that could break down communications barriers among the various parties concerned. "If we could get linked electronically to our customers--both sending and receiving--that's to everyone's benefit," says Gilmore.

What EDI would do is eliminate a lot of redundancy and phone tag in the real estate industry, maintains American Land Title Association's Sakrekoff. However, he warns, "There's no reason to do EDI if you don't automate your processes and reengineer to eliminate bottlenecks; otherwise, you may as well have a high-speed fax machine." To keep costs down and eliminate errors, the idea is to "capture the keystrokes that someone else is keying into your software and then take those same keystrokes and distribute them throughout the title process, escrow process and various other processes." Unfortunately, he adds, "I've seen operations where a lot of the same data is rekeyed 30 times." ALTA presently is working with the Mortgage Bankers Association to develop ANSI X.12 standards for title and other transactions.

With EDI, and possibly image, on the horizon title insurers are moving closer to a distributed processing environment. Although a lot of companies, says Gilmore, are dealing with the connectivity issue between the title branch offices and the title plant through courier services or a pipeline of terminals hooked to a mainframe, "my feeling is that the wave of the future is to have an infrastructure that allows for true distributed processing."

Currently, Fidelity is riding that wave and is working on developing a consistent automation platform. Since it has grown by acquiring other companies, it now needs a strategy to integrate disparate computer systems. "Because we've acquired companies that are regional in nature, none of the systems that exist meet the demands of a nationwide company," Gilmore says. What will make the infrastructure easier to build, he notes, is that Fidelity isn't tied to legacy systems: "There's no huge capital investment in hardware or software."