00-02: Recent Legislation Regarding Missouri Title Insurance
* This bulletin was repealed by 08-05
To: All Missouri Title Insurers, Agents, Agencies and Educational Providers
From: Keith A. Wenzel, Director of Insurance, State of Missouri
Re: Recent Legislation Regarding Missouri Title Insurance Laws
Date: October 10, 2000
During its 2000 legislative session, the Missouri General Assembly enacted Senate Bill 894 effective January 1, 2001, which amended Chapter 381 of the Revised Statutes of Missouri. Subject to few exceptions, Senate Bill 894 repeals the majority of Chapter 381 and enacts in lieu thereof detailed legislation governing the business of title insurance in the State of Missouri. As a result, the Department is providing the following information to address certain title insurance concerns presented by Senate Bill 894.
Please be advised that the following Bulletin does not constitute a comprehensive review of Senate Bill 894. The Department strongly cautions all interested persons to independently review the recent legislation and to promptly take all necessary actions to ensure compliance with Missouri law. The following information is intended for preliminary guidance only but may be consulted until such time as any necessary regulations have been promulgated:
Senate Bill 894 makes significant changes to the statutory definitions of those persons required to be licensed as a title insurer, agent or agency in Missouri. The Department advises all licensees or other interested persons to review the recent legislative changes and to promptly take any necessary steps to ensure appropriate licensing. All Departmental regulations governing title insurance licensing application procedures remain applicable and should be utilized.
Unlike current requirements, Senate Bill 894 establishes a mandatory continuing education requirement for all Missouri-licensed title agents. RSMo. § 381.118.1. Under the new statutory provisions, title agents are now required to complete eight hours of title-insurance-related continuing education courses by their biennial licensing renewal date. All qualifying continuing education courses should be approved by the Department prior to agent enrollment.
The Department currently anticipates promulgating official rules governing continuing education for title agents. Until such regulations are promulgated, all persons seeking course approval for a title insurance continuing education course should submit the attached application (Exhibit A). Use of the attached application will expedite processing and assist in eliminating any unnecessary delay. To ensure prompt approval, applicants should submit all necessary application materials and the required fee at least 45 days prior to the scheduled course date.
To certify agent attendance and assist with reporting requirements, all course providers should issue the attached Certificate of Course Completion (Exhibit B) to every attendant at the conclusion of each course. Agents are cautioned to retain these certifications as proof of attendance. Production of Course Completion Certificates may be required by the Department at the time of agent reporting.
Please be advised that the Department will begin to accept applications for course approval on October 10, 2000. Any such approval will not be effective, however, until January 1, 2001. All persons seeking approval for courses to be offered before February 15, 2001 should submit application materials to the Department before November 30, 2000, to allow sufficient time for processing.
1) General Approval
Effective January 1, 2001, any form issued in connection with title insurance written by an insurer or rating organization must be submitted to the Director for approval prior to being issued or delivered. RSMo. § 381.085.1. Such forms include, but are not limited to, title insurance policies, standard form endorsements and title insurance commitments issued prior to the issuance of a title insurance policy. RSMo. § 381.085.2. Likewise, any term, condition or exception to coverage provided by an approved policy must be similarly submitted for approval. Please note that an exception is provided for any term, condition or exception that is ascertained from a title search or an inspection/survey of the property to be insured
To eliminate any unnecessary burden or delay, insurers/rating organizations may begin to submit applicable forms to the Department for approval on October 10, 2000. Approval requests under Senate Bill 894 should be clearly identified in an attached cover letter or memorandum to avoid processing delay. Any subsequent approval by the Department will not be effective until January 1, 2001.
All filings should be submitted in duplicate and include a self-addressed postage prepaid envelope sufficient to mail a complete set of the material submitted. Each filing should contain all required documents and should be accompanied by a TD-2 form. All applicable TD-2 filing fees will be billed. Materials should be submitted to the Missouri Department of Insurance, Attn: Property & Casualty Section, P.O. Box 690, Jefferson City, Missouri 65102.
2) Purchaser Notification Provisions
Any title insurer, agency or agent issuing a lender's title insurance policy in connection with a mortgage loan that is "made simultaneously with the purchase of all or part of the real estate securing the loan" must now provide written notice to the purchaser-mortgagor which outlines the purchaser's rights under a lender's title insurance policy and provides general information regarding title insurance. RSMo. § 381.015(2). Senate Bill 894 requires that all such notifications be made on a form prescribed or approved by the Department. Until an approved form has been promulgated by regulation, proposed purchaser notification provisions should be submitted to the Property & Casualty section for approval.
To assist the title industry, the suggested language found in Exhibit C attached hereto will be deemed by the Department to satisfy Senate Bill 894's notification requirements. While an entity is not prohibited from submitting alternative notification provisions, please be advised that any suggested language should be both accurate and practical. Suggested purchaser notification forms may be submitted to the Department for approval beginning October 10, 2000. Please submit this material in a timely fashion to prevent any unnecessary delay.
3) Disclosure of Affiliated Business
Senate Bill 894 also contains mandatory provisions which require that title agents and agencies disclose certain "affiliated business" arrangements. Specifically, the new RSMo. §381.125 provides:
Whenever the business to be written [by a title agency or agent] constitutes affiliated business, prior to commencing the transaction, the title agency or agent shall ensure that its customer has been provided with disclosure of the existence of the affiliated business arrangement and a written estimate of the charge or range of charges generally made for the title services provided by the title agency or agent.
The term affiliated business is defined in RSMo. §381.009(3) as:
Any portion of a title insurance agency's business written in this state that was referred to it by a producer of title insurance business or by an associate of the producer, where the producer or association, or both, have a financial interest in the title agency.
Senate Bill 894 specifically authorizes the Director to promulgate rules and/or prescribe a form for the disclosure of affiliated business. Until such time as any such forms are promulgated, the suggested language found in Exhibit D attached hereto will be deemed by the Department to satisfy Senate Bill 894's disclosure requirements. Failure to provide adequate disclosure may result in corrective or disciplinary action.
All premium rates used by a title insurer must now be approved by the Department. RSMo. § 381.092; RSMo. § 381.032. The Director is required to disapprove any rate that is "unreasonably high,. . .inadequate for the safeness and soundness of the insurer" or "unfairly discriminatory between risks in this state involving essentially the same hazards and expense elements." RSMo. § 381.092.1. Premium rate schedules must be filed with the Department by January 31, 2001. RSMo. § 381.032.1.
Developing standards for rate filings necessarily involves a complex analysis of various factors. The Department recognizes the need to develop guidelines that promote uniformity and assist the Department's review without imposing an undue financial or administrative burden on filing entities. In order to update the Department's records and help establish a benchmark for the title insurance rates in effect at the time of the passage of Senate Bill 894, title insurance carriers will need to file with the Department the rates and rating manuals that they had in effect on August 28, 2000.
Thereafter, until such time as official rules have been promulgated governing the filing/approval of premium rates, rate filings should be submitted in accordance with Exhibit A of 20 CSR 500-7.100 attached hereto. It will be the responsibility of each insurer and/or filing entity to submit any and all additional information necessary to enable the Department to establish the propriety of any proposed rate. The following standards/definitions will be utilized by the Department during its review:
- Premium rates will be deemed unreasonably high if, in the aggregate, they are likely to produce a long run profit that is unreasonably excessive in relation to the riskiness of the business or if expenses are unreasonably excessive in relation to the services rendered.
- Premium rates will be deemed inadequate if they are clearly insufficient, together with investment income attributable to them, to sustain projected losses and expenses or if continued use of such premiums will have the effect of substantially lessening competition or the effect of tending to create a monopoly.
- Premium rates will be deemed unfairly discriminatory if the premium charged for a policy is higher than the premium for an identical policy within the same classification with a similar face amount of liability and such difference does not reasonably reflect the difference in loss and expense experience and/or is not actuarially measurable or credible.
Information submitted in a rate filing should be appropriately labeled and should include all relevant information from both within and outside of this state which may affect the rate charged.
Submitted information should contain data for the three-year period immediately prior to the filing and should include, but not be limited to, information evidencing:
- Incurred and projected losses, including, loss adjustment expenses;
- Incurred and projected expenses, including, commissions, general administrative expenses, taxes, licenses and fees and any other special expenses;
- Incurred and projected investment income;
- Adequacy of loss reserves; and
- Any rate changes made in the three years immediately prior to the filing.
All submitted information should be presented in a manner that will allow the Department to easily ascertain the identity and relevance of supporting documentation and the information provided. Failure to supply sufficient documentation will render the filing incomplete. Additionally, filings that do not reasonably identify how supporting documentation relates to the proposed rate will likewise be deemed incomplete. Incomplete filings will be returned and not reviewed for substantive content. Please be advised that withholding information or knowingly giving false or misleading information to the Department that will affect rates or fees charged constitutes a Class A violation under Senate Bill 894 that may result in disciplinary action and/or a fine. RSMo. § 381.035.
All filings should be submitted in duplicate and include a self-addressed postage prepaid envelope sufficient to mail a complete set of the material submitted. Each filing should contain a complete set of all required documents and be accompanied by a TD-2 form. All applicable TD-2 filing fees will be billed. Further each filing should contain a summary or memorandum which describes/explains: a) any rate-making procedures utilized; b) any statistical data or actuarial method utilized; and c) premium and loss adjustment factors and the method or judgment underlying each factor and any other similar information.
Please be advised that "information filed with the Director relating to the experience of a particular agency" is deemed confidential under RSMo. §381.032.4 unless the Director finds it in the public interest to disclose such information. Any information believed to be confidential under RSMo. §381.032 or any other authority should be clearly identified and will be handled in accordance with 20 CSR 10-2.400.
The Department will begin to accept rate filings for approval on November 1, 2000. Any approval of such filings will not be effective, however, until January 1, 2001.
Your cooperation in this process and prompt submission of all necessary materials will assist the Department in approving proposed filings as expeditiously as possible. Please be advised, however, that Senate Bill 894 specifically authorizes the use of premium rates currently on file with the Department until proposed rates under Senate Bill 894 have been approved.
Senate Bill 894 makes several changes to the financial requirements for title insurers transacting title insurance business in this state. Included in these changes are changes to admitted assets, capitalization and reserves. While some of these changes follow the National Association of Insurance Commissioners' Title Insurance Model Act, others may differ from both that model act and current law. Each title insurer is encouraged to read the provisions of the legislation, determine how it would affect the title insurer's accounting practices and contact the Division of Financial Regulation if they have specific questions as to how Senate Bill 894's financial requirements may affect them.
The Department is currently in the process of formulating guidelines for experience reporting as required by RSMo. § 381.108. It is the Department's goal to promulgate standards that do not impose an undue burden on title insurers in Missouri yet allow the Department to gather all necessary and pertinent information in an organized and efficient manner. Any proposed standards will be published in the Missouri Register in compliance with Missouri law prior to being promulgated.
Once again, all interested persons are encouraged to thoroughly review Senate Bill 894. Copies of the new legislation may be obtained through the Department's website at www.insurance.state.mo.us. Should you have any questions or comments regarding this matter, please contact the Property and Casualty Section at (573) 751-3365 or at www.insurance.state.mo.us.