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Lawmakers in Illinois are considering a significant overhaul of the state’s title insurance regulatory framework through the introduction of S.B. 2648.
The new legislation was introduced by state Sen. Bill Cunningham (D). It proposes that all powers, duties, rights and responsibilities under the Illinois Title Insurance Act be transferred from the Department of Financial and Professional Regulation (IDFPR) to the Department of Insurance (DOI).
Additionally, it calls for the transfer of relevant records and funds from the IDFPR to the DOI.
Peter Birnbaum, the executive chairman of Chicago-based title insurance underwriter Advocus, has been a vocal supporter of the bill. Reflecting on his 44-year career in the title industry, he expressed frustration over the state’s regulatory approach.
“Over the last 10 to 15 years, (IDFPR’s) willingness to engage and take on some of these bad actors has dissipated to the point where they literally do nothing,” Birnbaum said. “Today, they only have one full-time staff person devoted to the title insurance division.”
Illinois stands out as the only state where title insurance is not regulated by a department of insurance. Birnbaum believes this unique structure has contributed to a lack of effective oversight.
“Early on, it worked pretty well,” he noted. “But now, the department generates about $2 million a year in revenue from the industry, yet they don’t devote resources to us.”
Addressing questionable practices
The absence of robust enforcement has allowed unethical practices to flourish, according to Birnbaum. He pointed to “sham affiliated business relationships” as a particular concern.
“Some of the things that we’re talking about are pretty egregious,” he said. “Bad behavior is usually passed along to the consumer in the form of higher prices. The Illinois Department of Insurance has a very good history of regulating the companies currently under its jurisdiction. They have a good reputation for protecting consumers and regulating conduct.”
Birnbaum recounted recent instances where homebuyers faced closing fees that were $500 to $1,000 higher than market rates due to such arrangements.
“In every case, the company backed down and reduced their fee to market when challenged,” he added.
Historical context, looking ahead
Concerns about Illinois’ title insurance practices are not new.
A 2007 report by the U.S. Government Accountability Office (GAO) highlighted issues such as referral fees and affiliated business arrangements that potentially reduce price competition and could indicate excessive pricing by insurers.
Further scrutiny came with the 2009 case of Chultem v. Ticor Title Insurance Co., where the plaintiffs alleged that certain title companies paid attorneys for referrals without requiring them to perform meaningful services, violating the Real Estate Settlement Procedures Act (RESPA).
Birnbaum remains hopeful that the proposed regulatory shift will lead to more effective oversight and consumer protection.
“It’s speculative that (the DOI) will do a good job, but past is prologue,” he said. “I think it’s a good bet. I know that the current regulator is a bad bet.”
English (US) ·