Quality Commitments: When Done Right, They Satisfy Underwriters and Customers
You can’t go wrong being educated, prepared, and mindful.
When writing about quality commitments we have two main goals: quality and excellence. Basically, we want to be sure we are producing superior commitments and policies.
But who decides whether or not we’ve attained these goals? The first answer is our underwriters. They’ll be looking to ensure that the quality commitment is written in a clear and unambiguous fashion so that all parties involved can easily see what’s covered by the policy and what isn’t.
Next up are the regulators. In my state of Texas, everything surrounding title insurance is regulated by the state, and the Texas Department of Insurance (TDI) routinely runs quality checks during audits.
However, our customers are the ultimate and most important judge of any of our business dealings, and it is up to us to ensure that the commitment for title insurance makes them feel reassured and enlightened rather than frustrated and confused. Buyers and lenders are looking for exceptions in a language that’s easy to understand, while owners want the language for requirements to be the clearest.
Let’s break down a commitment for title insurance. This step in the process comes after the receipt of a bona fide order and must be completed as soon as possible. The exception is when the company is unwilling to insure said order. In the event that the commitment is issued, liability and obligations end ninety days after the commitment’s start date.
When selecting the words to include in a commitment, it’s important to understand the distinction between language describing the insured land and language described as an exception from coverage. When describing an easement estate on Schedule A, we want the description to be as detailed as possible, because that limits liability. When describing an easement on Schedule B, we want to be as general as possible, because we limit our liability.
Requirements appear on Schedule C of commitments – and do not appear on policies. “Requirements” in this case reference items that must be resolved to the satisfaction of the underwriter before the policy can be issued. There may be instances when it’s necessary to tell a proposed insured something about the policy that will be issued. While there’s no standard way to give this type of information, the best practice would be to add a “note” – containing information. Remember, these “notes” are only used to include additional information about policies and never to provide information about the status of the title.
There are things that don’t belong on commitments. Some examples would be “affirmative” statements about what was found during the title search, instructions about how closing or escrow should be handled, information about transactions or policies outside of the outlined requirements, or details advising the insured about “rights of parties in possession” or amendments of the “area and boundary exception.”
With all of this information in mind, the question still remains: How do we achieve quality commitments and policies? The first step is education. Everyone in the organization must have appropriate training in the use of the escrow/closing and title production system(s). It’s critically important for each person to understand how the data they input is utilized by each process. The next step is the natural progression into preparation. Prep for quality starts with the setup process of the escrow/closing and the title production system.
At the end of the day, it’s about remaining mindful of the parties who will be reading your report or commitment and what it is they mean to do with it. If you go into the commitment process with that in mind and remain armed with the information you’ve gathered, you’re headed in the right direction.
Be educated in the process, be prepared for what you’re about to do, and be mindful of our clients and you can’t go wrong. If you would like to learn more about writing quality commitments, log onto our Alliant National Agent Resource Center and check out our Resource Center tab to view our new webinar on the topic.