Section 228.0 sets forth the purpose of the rule.

Section 228.1 provides definitions applicable to the rule.

Section 228.2 sets forth that an inducement prohibited by Insurance Law section 6409(d) includes providing any consideration or thing of value to a person or entity for title insurance business including for the purpose of maintaining existing business or obtaining future title insurance business, regardless of whether it is provided as a quid pro quo for specific business. It includes a list of expenses that are prohibited under section 6409(d) and a list of types of expenses that are permitted.

Section 228.3 provides a framework for reporting expenses so that only proper expenditures are included in the title insurance rate. This section also requires all licensed title insurance corporations to provide to its appointed title insurance agents, revenue and expenses schedules in connection with the annual data call. It requires all licensed title insurance agents, unless their revenue and expenses are reported by an employer or affiliated entity, to submit revenue and expense schedules in connection with the annual data call, and ensure that prohibited expenditures are excluded. It further requires the title insurance corporations to compile the schedules and submit them to the statistical agent. In addition, the section requires each licensed title insurance corporation to file with the Superintendent individual annual premium and expense reports.

Section 228.4 provides that expenses allocated by a title insurance corporation to New York may not exceed the percent of premium written in New York by that insurer, compared to nationwide premiums written, and that improper expenditures may not be allocated to New York.

Section 228.5 provides parameters for ancillary closing costs charged in residential transactions including maximum charges for Patriot, bankruptcy, and municipal searches. The regulation provides for a flat fee that may be charged for certain services, including escrow services and recording of closing documents. The regulation also provides that every title insurance corporation and title insurance agent shall pay the title insurance closer for closing services and prohibit a closer from receiving any compensation from the applicant. It permits the title insurance closer to charge a reasonable fee for remitting a loan payoff.

Section 228.6 requires that at least once every four years a filing must be made demonstrating that the title insurance corporation’s or rate service organization’s title insurance rates comply with Article 23 (i.e., they are not excessive, inadequate or discriminatory).

1. Statutory authority: Financial Services Law (“FSL”) sections 202, 301, and 302 and Insurance Law sections 301, 2110, 2119, 2303, 2304, 2306, 2315, and 6409 and Articles 23 and 24.

2. Legislative objectives: To address excessive rates, unfair methods of competition and improper inducements.

3. Needs and benefits: The Department’s investigation revealed industry-wide practices that violate Insurance Law section 6409(d), contribute to excessive rates, and constitute untrustworthiness and deceptive acts and practices. This rule provides consumers with additional protection against excessive rates and unreasonable closing costs and helps to ensure that (a) title insurance corporations and agents comply with the Insurance Law, (b) selection of a title insurance corporation or agent is not based on which entity can provide the most lavish inducements, (c) rates are not excessive, and (d) unreasonable and excessive markups of ancillary charges are eliminated.

The rule provides guidance, by clarifying unequivocally that nothing of value may be given as an inducement for title insurance business, including maintaining current business or obtaining future business, and that a quid pro quo is not necessary for an inducement to exist. It also provides lists of specific expenditures that are prohibited to be made to or on behalf of those persons specified in Insurance Law section 6409(d), and lists of specific expenditures that are permitted.

4. Costs: The rule requires title insurance corporations to restate any expense schedule submitted in the past six years that includes improper expenditures, which will impose a cost. To reduce costs to regulated parties, the rule permits the option of filing a request for a five percent rate reduction, which may be submitted by a title insurance corporation or a rate service organization on behalf of its members that adopt the filing.

Compliance with the rule’s reporting requirements should not cause any title insurance agent to incur substantial costs, the majority of which have reported expenses since 2010, are familiar with the schedules, and have already incurred any necessary set-up cost. The rule does not require title insurance agents to restate expense schedules.

The rule imposes maximum charges for ancillary services in connection with residential transactions, and requires title closers to be compensated by the title insurance corporation or agent that engaged their services for the services provided on their behalf at the closing, which will impact revenue. However, closers will be permitted to charge for the remittance of a loan payoff, which will provide revenue to closers.

The rule also requires that at least once every four years, the title insurance corporation or rate service organization submit a filing to the Superintendent demonstrating that title insurance rates comply with Article 23. The cost of making the filings will vary, depending upon the amount of premium written and the amount of work required to prepare the submission.

5. Local government mandates: The rule imposes no new programs, services, duties or responsibilities on any county, city, town, village, school district, fire district or other special district.

6. Paperwork: The rule requires a one-time restatement of certain expense schedules and requires title insurance corporations and agents to submit certain schedules in response to the annual agent data call. The rule also requires title insurance corporations or a rate service organization to report compliance with Article 23 to the Superintendent every four years.

7. Duplication: This rule does not duplicate or conflict with any other existing state or federal rule, or other legal requirement.

8. Alternatives: The Department proposed a similar rule on May 6, 2015, to which the Department received more than 1,000 written comments. The Department considered a number of alternatives and suggestions from the industry and has significantly revised the earlier proposal but believes that there is no other viable alternative to address abuses in the title insurance industry, particularly in connection with violations of Insurance Law section 6409(d).

9. Federal standards: The Real Estate Settlement Procedures Act (“RESPA”), 12 USC § 2607, provides little guidance regarding the type of expenditures considered to be inducements for referring business. This rule is more inclusive than RESPA, thereby providing greater protection to consumers. As such, this rule is not inconsistent with RESPA.

10. Compliance schedule: The provisions relating to prohibited expenditures and caps on ancillary charges go into effect as soon as the regulation is effective. The reporting requirements go into effect 120 - 180 days after the effective date of the rule.

A revised Regulatory Flexibility Analysis for Small Businesses and Local Governments (“RFA”) is not required for the adoption of new 11 NYCRR 218 (Insurance Regulation 208) because the non-substantive revisions to the regulation do not require a change to the previously published RFA.

A revised Rural Area Flexibility Analysis (“RAFA”) is not required for the adoption of new 11 NYCRR 218 (Insurance Regulation 208) because the non-substantive revisions to the regulation do not require a change to the previously published RAFA.

A revised Job Impact Statement (“JIS”) is not required for the adoption of new 11 NYCRR 218 (Insurance Regulation 208) because the non-substantive revisions to the regulation do not require a change to the previously published JIS.

As a rule that requires a RFA, RAFA or JIS, this rule will be initially reviewed in the calendar year 2020, which is no later than the 3rd year after the year in which this rule is being adopted.

The Department of Financial Services (“Department”) originally published a proposal to clarify what constitutes an inducement for title insurance business pursuant to Insurance Law section 6409(d), to provide guidance with respect to expense reporting and allocation of expenses, and to impose limits on ancillary searches and services, including the payment to title insurance closers on May 6, 2015. The Department received more than 1,000 written comments and met with industry representatives with regard to the proposed regulation. A revised version of the initial proposal was newly proposed on May 3, 2017. The summary of comments herein address that proposal.

The Department received almost 300 written comments from many interested parties in response to its publication of the rule in the New York State Register, including from title insurance corporations, title insurance agents, title insurance closers, attorneys, trade associations, a rate service organization, and public officials. The Department met with several stakeholders, industry representatives and interested parties to listen to their concerns.

Comments were made with respect to 11 NYCRR 228 sections 228.1 (definitions); 228.2 (regarding prohibitions on inducements for future title insurance business); 228.3 (regarding expense reporting and rate filings); and 228.5 (regarding ancillary charges, including payment to title insurance closers).

The Department addresses each of the comments in full in the complete version of the assessment of public comments, which will be posted on the Department’s website. Where appropriate, the Department made certain non-substantive revisions, as discussed in the complete version of the assessment.