In addition to being informed about title insurance, real estate purchasers need to be confident that the title insurance industry is competitive and complies with provincial law. As Ontario's insurance regulator, the Financial Services Commission of Ontario (FSCO) is responsible for ensuring that insurance companies follow the Insurance Act and have fair business practices.
To meet its obligations, FSCO periodically conducts reviews and/or surveys of the insurance industry using a risk-based approach. Under this regulatory approach, FSCO focuses its reviews on those risks to the public that have the potential to cause the greatest degree of harm. The benefit of this approach is that regulatory resources are maximized and compliance costs are minimized.
Title Insurance Report – November 2008
In 2007, FSCO conducted on-site reviews of six title insurance companies that collected the majority of the title insurance premiums in Ontario. The on-site reviews were conducted by members of FSCO’s Market Conduct Branch. The reviews revealed that four of the six insurance companies primarily sell title insurance. FSCO’s reviews focused on evaluating several areas of each company. The insurers provided information both verbally in interviews, and through written documentation. FSCO’s Title Insurance Report, November 2008 provides a summary of FSCO's findings.
Report on FSCO's Review of Residential Title Insurance – September 2015
Between December 2013 and August 2014, FSCO conducted a review of five title insurance companies who were licensed to sell title insurance products in Ontario. The Report on FSCO's Review of Residential Title Insurance, September 2015 Size: ## kb outlines the findings of FSCO’s review, which focuses on the compensation arrangements that exist between title insurers and lawyers who distribute title insurance products to their clients. In cases where lawyers distribute title insurance products to consumers on behalf of insurance companies, there are potential conflicts of interest in ensuring consumers are provided suitable products. This review considers the controls title insurers have in place in overseeing the distribution of their products, as well as what disclosures are provided to consumers to enable them to make informed decisions about the title insurance product they plan to purchase.
The Law Society of Upper Canada's (LSUC) Rules of Professional Conduct prohibit lawyers from accepting compensation from a title insurer that is in the nature of a referral fee or a commission, or fee with respect to title insurance coverage. Whether a particular compensation arrangement between a lawyer and title insurer is permissible depends on the nature of the particular arrangement.
The LSUC has brought to FSCO's attention, and wishes to provide clarification on the following sentence on page 6 of the Report on FSCO's Review of Residential Title Insurance dated September 2015: " ….it should be noted that from LSUC's perspective these fees that are paid to lawyers are not considered referral fees. LSUC considers these fees to be payments for the lawyers' legal services and/or administrative/processing services."