Title insurance protects against financial loss from defects in insured titles of real property. Losses from title insurance policies are not the primary cost to title insurers and title insurance agents. The primary costs incurred by title insurers and title insurance agents are maintenance of tract indexes and research to find title defects before the policies are issued. Title insurance is regulated differently than property and casualty insurance because loss ratios for title insurance are relatively low and expense ratios are fairly high. To implement and administer chapter 48.29 RCW, the commissioner needs detailed information about the costs underlying title insurance policies to regulate rates and ensure consumers are offered fair and equitable premiums. The purpose of this chapter is to adopt rules that establish:

(1) Standards for determining whether a premium rate complies with RCW 48.29.143;

(2) Standards and procedures that apply to RCW 48.29.147;

(3) The date after which title insurers must use rates that have been filed and approved under RCW 48.29.147;

(4) Information and data that must be reported to the statistical reporting agent designated by the commissioner;

(5) The allocation of the costs and expenses of the statistical reporting agent among the title insurers and title insurance agents;

(6) The apportionment of the expense of the examination of the statistical reporting agent among the title insurers and title insurance agents;

(7) The duties and obligations of the statistical reporting agent;

(8) The information and manner in which the statistical reporting agent must file the information received from the title insurers and title insurance agents with the commissioner, title insurers, and title insurance agents; and

(9) Requirements for submitting all rate filings through SERFF.

The definitions in this section apply to this chapter:

"Commitment" means the same as in RCW 48.29.010 (3)(c).

"Complete filing" means a package of information containing rates, supporting information, documents and exhibits submitted to the commissioner electronically using the system for electronic rate and form filing (SERFF).

"Date filed" means the date a complete filing has been received and accepted by the commissioner.

"Filer" means a person, organization or other entity that files title insurance rates with the commissioner for a title insurer.

"NAIC" means the National Association of Insurance Commissioners.

"Nonresidential policies" means title insurance policies on properties that are not "residential policies" as defined below.

"Objection letter" means correspondence created in SERFF and sent by the commissioner to the filer that:

(a) Requests clarification, documentation or other information;

(b) Explains errors or omissions in the filing; or

(c) Disapproves the filing under RCW 48.29.147.

"Policy" means a title policy as defined in RCW 48.29.010 (3)(a), and includes endorsements.

"Producer" means:

(a) A "producer of title insurance" as defined in WAC 284-29-205(8); and

(b) An "associate of producers" as defined in RCW 48.29.010 (3)(f).

"Rate" or "rates" means all classification manuals, rate and rule manuals, rating plans, rating schedules, minimum rates, class rates, and rating rules that title insurers must file under RCW 48.29.147.

"Residential policies" means title insurance policies that insure the title to real property having a house, individual condominium unit, mobile home permanently affixed to real estate, or other dwelling unit intended principally for the occupancy of from one to four families, but does not include multifamily structures intended for the use of five plus families, undeveloped lots, or real estate intended principally for business, commercial, industrial, religious, educational, or agricultural purposes even if some portion of the real estate is used for residential purposes.

"SERFF" means the system for electronic rate and form filing. SERFF is a proprietary NAIC computer-based application that allows insurers and other entities to create and submit rate, rule and form filings electronically to the commissioner.

"Title Company Statistical Report" means the data filing forms and instructions published on the commissioner's website at www.insurance.wa.gov and incorporated into this chapter by reference. The data form and instructions are based upon the Title Agent Statistical Data Plan adopted by the NAIC.

"Title insurance agent" or "agent" has the same meaning as in RCW 48.17.010(15).

"Title insurance" has the same meaning as in RCW 48.11.100.

"Title insurer" means a title insurance company authorized to conduct title insurance business in this state under chapter 48.05 RCW.

(1) On and after July 1, 2016, all rates used in Washington state must be filed and approved under RCW 48.29.147.

(2) Title insurers must submit the rate filings required under RCW 48.29.147 and subsection (1) of this section to the commissioner by March 1, 2016, for rates to be effective on July 1, 2016. This rule allows the commissioner time to take final action on rates filed under this chapter before the effective date of July 1, 2016.

(3) Rates filed under RCW 48.29.140(2) must not be used for commitments issued on or after July 1, 2016.

(1) When a title insurer files rates with the commissioner, the title insurer must demonstrate that the proposed rates comply with RCW 48.29.143. To the extent possible:

(a) Each title insurer must provide credible data to support the proposed rates. If credible data are not available, the title insurer must provide supporting documentation that describes its process for developing the proposed rates and demonstrates that they meet the requirements of RCW 48.29.143.

(b) Data used to support the proposed rates should be from the state of Washington. If data from other states are used, the title insurer must explain why those data are similar to what would be expected in Washington.

(2) If a title insurer proposes to use rates that are identical to the rates of another title insurer, the rate filing must include supporting information that demonstrates that the title insurer's proposed rates meet the requirements of RCW 48.29.143. It is not sufficient simply to state that the proposed rates are identical to those of another title insurer or that the rates are being filed for competitive purposes.

(3) Under RCW 48.29.143(2), a title insurer's provision for underwriting profit must be consistent with its cost of capital. The rate filing must demonstrate that expected underwriting profit, plus expected investment income on reserves and surplus, minus expected federal income taxes corresponds to an appropriate target after-tax rate of return on the title insurer's equity or net worth.

(4) The rate filing must provide sufficient information so that the commissioner may determine whether the proposed rates comply with RCW 48.29.147(3).

Situations in which the rates are unfairly discriminatory under RCW 48.29.143(1) include, but are not limited to:

(1) Negotiation or bidding of price;

(2) Rating rules that do not have a definite charge for every bracket of coverage;

(3) Discounts not provided to all qualifying risks;

(4) Rating plans in which policies:

(a) Generating higher premiums subsidize smaller policies; or

(b) From one geographical area subsidize those from another geographical area.

(5) A title insurer's application of more than one rate schedule to similarly situated risks in a county or other defined geographical area. For example, it is unfairly discriminatory for a title insurer to use different rate schedules for business produced by different title insurance agents in a specific rating territory.

(1) In many instances title insurers and title insurance agents issue title insurance commitments prior to issuing title insurance policies. Sometimes the transaction for which the title insurance commitment was issued does not close, the title insurance policy is issued by another title insurer, or the title insurance commitment is canceled. However, since no policy is issued, no title insurance premium is collected by the title insurer or title insurance agent. Therefore, any cancellation fee that title insurers and title insurance agents may collect must not be considered to be premium and thus must not be included in a title insurance rate filing.

(2) However, this shall not be construed in any manner to prohibit title insurers and title insurance agents from charging and collecting a cancellation fee or that title insurers and title insurance agents are required to provide free title commitments.

If the rates for a title insurance policy (including endorsements) depend in whole or in part upon the judgment of the title insurer or agent, the title insurer must:

(1) File rating rules that describe the specific criteria used for making the rates;

(2) Document the rationale for each judgment rate referencing the filed rating rule;

(3) Retain supporting documentation required under this section for at least three years following the effective date of the policy;

(4) Make the documentation available for examination by the commissioner on request; and

(5) Treat all similarly situated risks equitably. If a title insurer files a judgment rate that reduces the rate for a particular endorsement to a percentage of the base rate, then the title insurer must reduce the rate for all similarly situated risks that meet the same criteria. For example, if the title insurer charges an insured that meets specific criteria a premium of ten percent of the base rate for the endorsement, another insured meeting the same criteria must also be charged a premium of ten percent of the base rate.

(1) Under RCW 48.29.210 and WAC 284-29-200 through 284-29-265, title insurers and title insurance agents:

(a) Are prohibited from giving anything of value to any person for the referral of title insurance business;

(b) Are prohibited from giving most things of value to persons who are in a position to refer or influence the referral of title insurance business;

(c) Must charge and collect for the costs of providing certain listed information, services, and other items of value that title insurers and their agents give to persons who are in a position to refer or influence the referral of title insurance business; and

(d) Are permitted to give specified things of value to producers of title insurance at no charge.

(2) Therefore, in making rates a title insurer must not include income or expenses related to the costs of:

(a) Giving anything of value to any person for the referral of title insurance business;

(b) Providing information, services, and other items of value that a title company is prohibited from giving to a producer of title insurance business under RCW 48.29.210 and WAC 284-29-200 through 284-29-265; and

(c) Providing information, services, and other items of value that the title insurer or a title insurance agent may give to producers if the title insurer or title insurance agent is paid for the information, services, or other items identified in WAC 284-29-200 through 284-29-265.

(3) However, in making rates a title insurer may include its income or expenses related to the costs of giving permitted things of value to producers of title insurance business and the title insurer's and title insurance agents' other marketing expenses.

(1) In support of the expense component of the rates, the title insurer must:

(a) Include estimates of expected expenses to issue title insurance policies and commitments;

(b) Exclude the expected expenses related to escrow and other activities not directly related to title insurance using an allocation based upon the income received from title insurance premiums and escrow income, except where an allocation process is not needed and the alternate calculation is fully explained;

(c) Exclude the expected expenses described in WAC 284-29A-070(2); and

(d) Show how those estimates were calculated and demonstrate how those estimates are connected to the proposed rates.

(2) The expense categories that must be considered when making rates include:

(a) Employees' compensation;

(b) Payroll taxes;

(c) Employee benefits;

(d) Contract labor;

(e) Rent, utilities, and repair;

(f) Title plant expenses and maintenance;

(g) Abstract and search expenses;

(h) Computer and software;

(i) Business insurance;

(j) Business legal;

(k) Accounting;

(l) Licenses, taxes, and fees;

(m) Marketing and sales;

(n) Travel and lodging;

(o) Employee education;

(p) Bank charges;

(q) Charge offs;

(r) Depreciation;

(s) Miscellaneous expenses;

(t) Loss and loss adjustment expense;

(u) Federal income taxes; and

(v) Other specifically identified expenses.

(3) To support the agent commission component of rates, it is not sufficient to state the commission rate and perform calculations based on that percentage. The title insurer's rate filing must include data that supports the expense component that applies to its title insurance agents.

(4) The supporting information required under this section may include the data from:

(a) Agent reports received by the title insurer in one or more years under previous regulatory requirements;

(b) The information received by the title insurer from the statistical reporting agent; and

(c) Any other relevant information.

All premium rates filed under RCW 48.29.147 and this chapter must include all costs related to the title insurance transaction, including the costs to:

(1) Maintain the tract indexes;

(2) Search and examine the title or title to be insured;

(3) Issue preliminary commitments;

(4) Determine that each insured estate has been created, conveyed or modified as shown in the policy;

(5) Evaluate coverage and amend the policy as needed with appropriate and reasonable exceptions, conditions or modifications; and

(6) Any other direct or indirect cost associated with performing these activities.

If the title agency contracts between a title insurer and the title insurer's appointed title agents provide for a split of premiums between the title insurer and the title insurance agent, the title insurer must file premium rate schedules using supporting data and information that are consistent with that contractual premium split. The title insurer's base rates should be consistent with its actual contractual split of premiums between the title insurer and its agents. The title insurer's use of more than one premium split with its agents, if any, must be addressed through the filing of rating rules that specify the situations in which other premium splits are used and the adjustments that result from their use.

(1) Each title insurer and title insurance agent must report premium, policy count, and expense data by county annually to the statistical reporting agent designated by the commissioner for the preceding calendar year by May 31st of each year, except as provided in subsection (5) of this section. Every title insurer must file a Title Company Statistical Report with the statistical reporting agent even if the title insurer had no written premium from a direct branch operation during the report year. These data must be reported using the Title Company Statistical Report and following the instructions published by the commissioner on the commissioner's website at www.insurance.wa.gov. These forms and instructions are incorporated into this chapter by reference.

(2) Each annual report required by this section must include:

(a) The following title order count data:

(i) Number of title orders opened;

(ii) Completed title orders in which a policy was issued; and

(iii) Number of title orders canceled as determined using WAC 284-29-260(10).

(b) Number of noninsurance title products produced:

(i) Number of searches billed to third parties; and

(ii) Number of searches purchased from third parties.

(c)(i) Total settlement, escrow, or closing transactions conducted;

(ii) Number of settlement, escrow, or closing transaction in which a title policy was not issued.

(d) The following premium and policy count data:

(i) Total number of title policies issued;

(ii) Number of residential policies issued;

(iii) Number of nonresidential policies issued;

(iv) Number of (d)(ii) and (iii) of this subsection in which the title insurer or title insurance agent conducted the settlement, escrow, or closing of the transaction.

(e) The following income data:

(i) Total written premium of the title insurer;

(ii) Total written premium of the title insurance agent;

(iii) Total written premium of the title insurance agent segregated by each title insurer for which the title insurance agent is appointed;

(iv) Total written premium remitted to the title insurers by the title insurance agent segregated by each title insurer for which the title insurance agent is appointed;

(v) Other written premium of the title insurance agent not included in (e)(iii) of this subsection;

(vi) Settlement, escrow, and closing income;

(vii) Title examination income;

(viii) Abstract and search income;

(ix) Income from canceled orders;

(x) Investment income; and

(xi) All other income.

(f) The following expense data related to issuing title insurance policies and commitments for all of the title insurer's or title insurance agent's business, excluding all expenses related to escrow and other activities not directly related to title insurance:

(i) Employees' compensation;

(ii) Payroll taxes;

(iii) Employee benefits;

(iv) Contract labor;

(v) Rent, utilities, and repair;

(vi) Title plant expense and maintenance;

(vii) Abstract and search expenditures;

(viii) Computer and software;

(ix) Business insurance;

(x) Business legal;

(xi) Accounting;

(xii) Licenses, taxes, and fees;

(xiii) Marketing and sales;

(xiv) Travel and lodging;

(xv) Employee education;

(xvi) Bank charges;

(xvii) Charge offs;

(xviii) Depreciation;

(xix) Miscellaneous expenses;

(xx) Loss, loss adjustment expense, loss mitigation, and underwriting expenses;

(xxi) Federal income tax incurred;

(xxii) Other specifically identified expenses; and

(xxiii) Other information required by the commissioner as specified in the Title Company Statistical Report under WAC 284-29A-110.

(g) An explanation that demonstrates that the expenses described in WAC 284-29A-070(2) have been excluded.

(3) The expense allocation between title insurance related expenses and escrow expenses shall be based upon the income received from title insurance premiums and related income and escrow income, except where an allocation process is not needed and the alternate calculation is fully explained.

(4) If the statistical reporting agent does not receive a report required under this section by May 31st of each year, the statistical reporting agent must notify the commissioner by June 15th. This notice must include the name of the title insurer or title insurance agent that did not send the report on time.

(5) For the 2013 calendar year report, each title insurer and title insurance agent must submit the report to the statistical reporting agent designated by the commissioner on or before September 1, 2014.

SERFF is a dynamic application that the NAIC will revise and enhance over time. To be consistent with NAIC filing standards and provide timely instructions to filers, the commissioner will incorporate documents posted on the SERFF website and on the commissioner's website into this chapter. By reference, the commissioner incorporates these documents into this chapter:

(1) The SERFF Industry Manual posted on the SERFF website (www.serff.com); and

(2) The Washington State SERFF Title Insurance Rate Filing General Instructions posted on the commissioner's website (www.insurance.wa.gov).

Filers must submit complete rate filings that comply with the SERFF Industry Manual posted on the SERFF website (www.serff.com) and the Washington State SERFF Title Insurance Rate Filing General Instructions posted on the commissioner's website (www.insurance.wa.gov). All rate filings must comply with these rules:

(1) Filers must submit all rate filings and related documents to the commissioner electronically using SERFF.

(2) Filers must send all written correspondence related to a rate filing in SERFF.

(3) Each rate filing must be accurate and internally consistent.

(4) Filers must not submit combined rate and form filings.

(1) The commissioner may reject and close any filing that does not comply with WAC 284-29A-120. If the commissioner rejects a filing, the title insurer has not filed rates with the commissioner.

(2) If the commissioner rejects a filing and the filer resubmits it as a new filing, the date filed will be the date the commissioner receives and accepts the new filing.

If the commissioner disapproves a filing under RCW 48.29.147, the objection letter will state the reason(s) for disapproval, including relevant law and administrative rules. Filers must:

(1) Provide a complete response to an objection letter. A complete response includes:

(a) A separate response to each objection; and

(b) If appropriate, revised exhibits and supporting documentation.

(2) Respond to the commissioner in a timely manner.

A title insurer may authorize a third-party filer to file rates on its behalf. For the purposes of this section, "third-party filer" means a person or entity in the business of providing insurance regulatory compliance services.

(1) If a title insurer delegates filing authority to a third-party filer, each filing must include as supporting documentation a letter signed by an officer of the title insurer authorizing the third-party filer to make filings on behalf of the title insurer.

(2) The title insurer may not delegate responsibility for the content of a filing to a third-party filer. The commissioner considers errors and omissions made by the third-party filer to be errors and omissions of the title insurer.

(3) If a third-party filer has a pattern of making filings that do not comply with this chapter, the commissioner may reject a delegation of filing authority from the title insurer.

The duties of the statistical reporting agent designated by the commissioner shall include, but not be limited to, the following:

(1) If any title insurer, title insurance agent, or both, do not file their annual report required by RCW 48.29.017 and WAC 284-29A-110 by May 31st of each year, the statistical reporting agent must notify the commissioner by June 15th of any title insurers or title insurance agents, or both, that failed to file their report;

(2) Review the reports received for quality and accuracy;

(3) Ensure that title insurers and title insurance agents are reporting data similarly and consistently;

(4) In consultation with the commissioner, aggregate data to a level that would not permit any user of the aggregate data to identify data associated with any particular title insurer, title insurance agent, or title insurance transaction;

(5) In consultation with the commissioner, produce the reports of the aggregated data by areas that are similar in expenses;

(6) Prepare and submit a report of the aggregated data to the title insurers, title insurance agents, and the commissioner;

(7) File the individual reports received from the title insurers and title insurance agents with the commissioner; and

(8) Other duties as agreed to between the commissioner and the statistical reporting agent consistent with RCW 48.29.017 and this chapter.

RCW 48.29.017(1) provides that the costs and expenses of the statistical reporting agent must be borne by all the authorized title insurers and licensed title insurance agents. RCW 48.03.060(6) provides that the expense of any examination of the statistical reporting agent must be borne by all the authorized title insurers and licensed title insurance agents.

(1) The criteria for determining the annual cost and expenses, including any examination costs, of the statistical reporting agent shall be determined by contract between the statistical reporting agent and the commissioner. A pro rata share of the costs and expenses of the statistical reporting agent shall be charged to all authorized title insurers and licensed title insurance agents. The allocation of the costs and expenses, including any examination costs, of the statistical reporting agent among the title insurers and title insurance agents shall be based upon written premium in this state by the title insurer or title insurance agent as compared to the entire written premium for all title insurance business written in this state. The written premium shall be determined as follows:

(a) The title insurer's premium volume for this state will be the amount of written premiums for the title insurer's direct operations as reported on schedule T of the title insurer's annual financial statement for the preceding calendar year. This amount should be the same as the total of direct written premiums by the title insurer in this state as filed with the statistical reporting agent.

(b) The title insurance agent's premium volume for this state will be the amount of direct written premiums for the preceding calendar year for all underwriters from the agents report filed with the statistical reporting agent.

(2) Every title insurer and title insurance agent must pay its portion of the costs and expenses, including any examination costs, of the statistical reporting agent within thirty days of receiving the billing for the costs and expenses, including an examination of the statistical reporting agent.

(3) Failure by a title insurer or title insurance agent to pay timely its portion of the costs and expenses, including any examination costs, of the statistical reporting agent is a violation of RCW 48.29.017 or 48.03.060(6) and will subject a title insurer to disciplinary action under chapter 48.05 RCW and a title insurance agent to disciplinary action under chapter 48.17 RCW.