New technology is enhancing electronic commerce and providing title insurers with increased productivity.
New technology is enhancing electronic commerce and providing title insurers with the increased productivity and cost-savings needed to negate shrinking fees.
Increasing competition in the title insurance industry is placing constant downward pressure on fee rates. This being the case, title companies are looking for ways to cut costs, and technology is seen by many firms as a means of doing that. By increasing the speed and efficiency with which work is done within the industry, technology is driving productivity up and costs down.
"Technology is a key component to the future of title companies because they are going to have to become more efficient to compete in a very competitive industry," says John Hollenbeck, vice president and national title processes director for Santa Ana, Calif.-based First American Title Insurance Co. "With technology comes the underlying expectation of speed and reduced costs, so we need to deliver products faster and cheaper."
Those expectations are coming from the mortgage industry, which tends to set the pace for title insurers. "The only reason someone orders title insurance is because they are getting a loan," says Mike O'Neil, vice president of electronic commerce and information systems with Chicago Title & Trust Co., Chicago. "So the title industry follows the mortgage industry's lead."
The Fannie Mae and Freddie Mac federal loan programs are among the most influential proponents of implementing new technology. "They are a real catalyst in expanding the use of electronic commerce," says Rob Chapman, vice president and division manager of Old Republic Business Information and Technology (ORBIT), a division of Minneapolis-based Old Republic National Title Insurance Co.
"Buying a home can be costly in terms of both time and money," says O'Neil. "Fannie Mae and Freddie Mac are trying to reduce the time frame required to complete the paperwork for loans. They want to squeeze the time and the cost out of the process."
With this incentive, forms of electronic commerce from faxes and e-mail to EDI (electronic data interchange) and the Internet are being put to use and are having the desired effect. Transfers of data involved in policy production, which in the past took days and even weeks and involved significant overnight shipping costs, have been reduced in many instances to a matter of minutes or even seconds and without the delivery charges.
"Title is a very document-based business," says David Tandy, president of Houston-based Landata Systems Inc., a subsidiary of Stewart Title Guaranty Co., also based in Houston. "And you can only push paper so fast."
For such a paper-intensive industry, fax technology was a boon when it was first made available, but it did not create a paperless environment, the chief objective of electronic commerce, points out Bob Palmer, senior vice president and chief information officer with Richmond, Va.-based Lawyers Title Insurance Corp.
"E-mail will continue to develop as a communication tool, but it will not be the only way to send data," says O'Neil.
Removing the human element In many instances, the impact of today's technology has gone beyond just simplifying hands-on production methods and has switched to eliminating the need for them entirely. So automation is removing the human element from the equation with the two-fold result of eliminating errors and cutting overhead costs.
"Technology is having its greatest impact on the title industry in two areas: increasing productivity and expanding connectivity," says Tandy.
By connectivity, Tandy means the communication lines between the title companies, their agents and the clients. And recently the focus of technology in the title insurance industry has shifted to this broadening area.
"When I entered the title industry eight years ago, all of the attention was on providing automation for agents to help in the production of title policies," says Palmer. "But in the last year or two the focus has switched to connectivity between ourselves and the lenders we work with."
The ultimate goal is for an order to be handled electronically from origination to closing, with as little human contact as possible. Through electronic ordering and delivery of the final policy, savings would be realized by several means: the elimination of delivery costs, increased efficiency and increased speed, says Tandy.
The transfer of payments maybe one sticking point, but Tandy believes that will change. "It is not really available yet, but it is coming."
"It will probably take something being added to the legal system outlining under what condition electronic signatures will be regarded as legally binding," says Palmer. "In the meantime, no company wants to be the guinea pig."
Another major obstacle to completing the electronic commerce loop is a lack of standardization in how data is kept in the real estate industry. "The counties, the title companies and individual real estate firms do not use compatible systems of keeping information and so it is not easily transferable," says Tandy.
One solution to this problem has been electronic data interchange. EDI is a form of electronic communication that allows different computer systems to share information by translating the data into a standardized form that both can understand.
"We will send data electronically to update the client's system and then send along the paper documents," says O'Neil. So while still not the perfect world sought with regard to electronic commerce, it is an effective means of electronic communication.
At Old Republic National Title Co., Minneapolis, research indicated that 127 human element steps were needed to move a title order through the system to closing. "But with the use of electronic commerce (the means of transferring data by purely electronic means) and the corresponding software, we have been able to reduce that number to 22," says Chapman.
Maintaining the flow And even those remaining steps are less susceptible to human error due to the Old Republic's Object-Oriented Work Flow system. This basically gives those at the administration level within the company the ability to re-route the workflow to avoid holdups in the processing of the policy. "If an employee is out sick or takes vacation, we can re-route the order to another employee so the flow continues," explains Chapman.
This type of continuous conveyor belt type of system is the basis of many of the latest software options available in the industry. Basically, the software automatically sends orders through the system and does not require prompting by an agent at each step in its progression.
The software speeds the process by allowing some functions to be completed simultaneously and by cutting out the shelf time inherent in how people work. "In the old system, the agent would typically print up a large stack of title applications and then fax the lot all at once," says O'Neil. "Through electronic commerce, as soon as the agent finishes with one application, it is sent on its way individually."
At any rate, the idea is to have the orders automatically move through the company to all the parties whose work is required to complete them. Landata Systems' software, called AIM, integrates the production software with that of imaging production and the title plant's database so the order can be opened, researched and closed all within one suite of software products.
"Once an order is in the door, it populates the entire company system, and everyone that needs to be involved to complete the policy has the information they need," says Hollenbeck of a similar software his company uses.
In addition, lenders prefer the one-stop shopping these softwares provide.
Web-enabled applications But for the software to reach its full potential it has to be easily accessible. And the Internet is the perfect highway system for such transactions.
Title companies have opened websites that provide customers with access to these production software packages, so the products can be ordered electronically.
At First American, this is available through the company's Fast Web service, says Hollenbeck. The title orders can be opened at the company's Internet website. The client is prompted to provide the needed property information with a series of simple computer screens. Then the order is routed to the correct department or departments within the firm.
However, if some firms are not comfortable sending the data over the Internet, Hollenbeck says, the Fast Web system has protocols which allow it to link directly with the client's computer system.
"Conducting business in this fashion over the Internet is a growing trend," says Tandy. "However, not all lenders are prepared for this move yet." But he adds that most are rapidly moving in that direction.
"People quickly began using fax technology because it was universal and inexpensive," says O'Neil. "You bought a fax machine and you were in business. That is not yet the case with this technology, but it is coming."
And most title executives feel the advantages possible with electronic commerce will eventually override most lender concerns. "Lenders want to be in an electronic relationship because the speed of the transactions gives them more control," says Palmer.
Control is another aspect the Internet can provide. Through their websites, title firms can offer lenders the ability to track their orders themselves without working through their agent or any other middlemen. All they need is their security code.
"Customers can log onto the title company's Internet site and with their security codes tap into their own orders," says Tandy. "They can see how close the orders are to completion and if their is a snag, they are aware of it and can check on the problem." This compares to earlier systems, many still in use, which require a call to a customer service number and more human contact and less automation.
"Lenders like the automated order and delivery functions we offer, but the ability to track their orders through the system minute by minute is very important," says Nancy Corkill, marketing director with Stewart Mortgage Information, another subsidiary of Stewart Title and Guaranty Co. She points out that some large firms may have as many as 1,500 orders a month in the pipeline, and the ability to track when each will close is important to their own flow of business.
The potential for conducting business on the Internet has barely been scratched by most industries, and the same is true forthe title business; however, for a communication-oriented industry like title insurance the potential could be even more far-reaching.
"If you look at what the Internet has done to get information into the hands of the common man, you can see the potential impact it can have on the business world," says O'Neil.
Scaling down the Internet However, while the Internet provides an excellent forum for the transfer of information, many lenders are still not comfortable conducting business in such a public forum. So most of the major title firms are developing their own private Internet systems connecting all of their offices, agents and clients in a more need - specific and secure environment.
At Old Republic National Title, the firm's wide-area network is still in the testing stages, according to Chapman. But he expects the system to enhance the advantages available with the firm's software, for both the insurer and the insured.
"It will make our personnel more efficient and lead to the production of higher quality documents more quickly," adds Kirk Knott, vice president and director of information systems at Old Republic.
Part of this perceived potential could lie in the fact that the investor is the title insurer. Little is required for the client to participate, and the advantages clearly aid both parties. "Clients wanting to order their products only need a personal computer, a modem and a printer. It is an easy system from the clients point of view," says Tandy.
The connection of all of a title firm's offices also opens up more avenues for the origination of new business, because more of the firm's ancillary products, flood certifications, credit checks, etc., will be more easily available to lenders who, as mentioned earlier, are seeking one-stop shopping in their real estate concerns. Agents will be able to initiate product orders into the automated system from their branch offices, a capability not possible with many previous systems.
"We offer title searches through our branch offices," says J.H. Clark, director of information services for Orlando, Fla.-based Attorneys' Title Insurance Fund. "At the time the order is taken, the title search is begun. This saves time."
Despite these advantages some industry executives think the field agents may have some reservations about the closer link to the home office. "Many agents like the autonomy they have had," says Palmer. "And to some extent, they fear the changes increased connectivity may bring." But it is a fact the agents will have to learn to live with.
Imaging comes into focus While technology has been concentrated recently on increasing the communication links within companies, advances in document imaging have continued to move forward as well.
The electronic imaging of court documents, while adding great speed to title searches, has been viewed by some as an island of technology surrounded and somewhat limited by the slow communication capabilities. However, electronic commerce is bridging that gulf, linking the two technologies and increasing the technology circuit.
"Imaging has always been a technology without a specific mission," explains Palmer. "But with the development of the Internet and private networks, it will finally come into its own. We are finally understanding how it can better help the industry."
Part of imaging's development has come about because of its expanded use in documenting county real estate records that are the basis of the title industry. Currently title firms gather the data and keep it electronically in the databases of their title plants.
Knott and Chapman report that Old Republic Title's title plant in Minneapolis has imaged documents back to 1990 for the city's nine-county metro area and has a similar project under way at another location. But the job would be easier if local county governments already keep their records in electronic form.
Tandy estimates that a large majority of the major counties across the country have taken steps to begin imaging their records.
While many firms are working with county governments on a state or regional basis to speed the implementation of imaging technology, they say it can be difficult.
"One of the challenges title companies face is the fact that the land title records we search and examine are often maintained in nonuniform, often archaic systems," says Hollenbeck.
"It is a real challenge," says Clark. "Each county is a kingdom unto itself." But he points out that Attorneys' Title has been able to work out arrangements with some counties.
Although it doesn't yet exist in a completed form, the technologic loop that will allow for the order, production and closing of title insurance and other real estate service products totally by electronic means is on the way.
But when it is fully integrated into the industry, this circle of electronic commerce should continue to invigorate the industry, allowing firms to fully realize the cost savings and efficiencies predicted for so long.