The Difference Between a Title Agent and a Title Underwriter

Most real estate agents use the words "title company" and "title insurance company" interchangeably. But in the title industry, the agent and the underwriter are different parties with different roles. Here is a general overview, which is useful background if you are learning about title company ownership.

Understanding the Two Roles

What a Title Agent Does

A title agent (or agency) is typically the company that works with buyers, sellers, agents, and lenders. Services commonly associated with title agents include:

• Title search: Reviewing public records to trace a property's ownership history and identify liens, encumbrances, or defects
• Title examination: Analyzing the search results to determine whether the title is insurable
• Defect clearing: Working with the parties to resolve title issues before closing
• Closing coordination: Coordinating the closing and the related documents and funds
• Policy issuance: Issuing title insurance commitments and policies under an underwriter's authority

Who performs these services, and under what rules, varies by state and by company.

What a Title Underwriter Does

A title underwriter is the insurance company that issues the title insurance policy and stands behind it financially. In general, an underwriter:

• Issues the insurance policy that protects buyers and lenders against covered title defects
• Establishes underwriting guidelines that appointed agents follow
• Pays covered claims under its policies
• Appoints agents under a written agreement

Premium rates are subject to state rules that vary. An underwriter is also subject to financial and regulatory requirements set by states.

How They Work Together

The relationship between agent and underwriter is set out in a written appointment agreement. The terms vary by underwriter and state. How liability is allocated depends on the agreement and applicable law. Review any agreement with your attorney.

How This Relates to Ownership

Ownership of a title agency is different from being a title underwriter. Licensing, capital and other requirements differ by state and by role. Discuss specifics with your attorney.

Choosing an underwriter involves several factors, covered in a separate article on how to choose a title insurance underwriter.

Questions Agents Ask About the Agent-Underwriter Relationship

• Can a title agent exist without an underwriter? Generally, an agency needs a relationship with an underwriter to issue policies. Rules vary by state, so confirm with your attorney.

• Is the underwriter my boss? The appointment agreement defines the relationship. Ask your attorney how it applies to you.

• What if my underwriter changes its rates or terms? Rate rules and appointment terms vary by state and agreement. Review them with your attorney.

• Do I need to understand underwriting? It can help to understand what an underwriter does and what drives claims risk. That knowledge helps you ask better questions of your advisors.

Tips for Understanding the Relationship

Read an Appointment Agreement

If you are learning about title companies, ask to review a sample appointment agreement with your attorney. Reading the terms and obligations gives you a concrete picture of how the relationship is documented.

Ask Questions

Ownership of a title company is a business decision. Consult your attorney and advisors.

Two Sides of the Same Transaction

Title agents and title underwriters have different roles in a transaction. Understanding the difference is a good first step in learning about title company ownership.

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