Patrick Stone, Founder and Executive Chairman of WFG National Title Insurance Company, cites five areas of change or concern.
On February 23rd, WFG National Title Insurance Company Founder and Executive Chairman Patrick F. Stone laid out key areas within the title industry that he is "concerned about, worried about, or focused on."
It came during WFG's Q1 "Quarterly Economic Outlook" webinar, which Stone co-hosts with noted economist Bill Conerly. These live, web-based Q&A sessions began in mid-2020 as a way for Stone to maintain his company's founding pledge to "communicate, collaborate and co-exist" with title agents and clients during the distancing days of the pandemic.
In 2022, as the webinar enters its third year, its audience is bigger than ever despite the easing of travel restrictions and the return of in-person conference attendance. And, with demand for balanced, insightful analysis of title insurance, real estate and the global economy stronger than ever, the series has expanded to a full hour. Conerly and Stone each offer opening statements before working through a series of questions submitted by audience members in advance.
Stone's remarks ended with five areas of change or concern he believes will impact the title insurance and real estate industries over the next one, three and five years.
1. Cyber security
"Number one is cyber security," Stone said emphatically. "I want to tell you straight up, if you haven't had your system audited and looked at, please do so. Our subsidiary WEST provides cyber security audits. Use us or use somebody, but take a look at your cyber security. Cyber threats and cyber theft have been around awhile, and a lot of it comes from Russia. Now, because of the Ukraine situation, the amount of Russian cyber threats will be going up dramatically, and I can guarantee you it is going to be a real problem in our industry.
He underscored the ancillary impact, even for those businesses that are not breached.
"If you can't assure your clients that you have good cyber security," he continued, "you can lose clients. You may also find lenders are going to be less willing to work with you unless you can state definitively that you have good cyber security – that has been audited – and you stand behind it."
2. Technology
The second thing he discussed was technology.
"We're going to see a lot of automation," he said. "I don't know if we will see tremendous change in eClosings. I don't think eClosings will happen as fast as people want them to, in part because we haven't really quantified the time or cost savings that result from eClosings."
He mentioned hybrid eClosings, which he said will continue, and Remote Online Notarizations (RON), in which he sees progress being made.
"There have been self-funded studies that indicate there is a time and cost savings from eClosings and RON, but lenders need to be able verify and validate the savings and efficiencies for themselves. We can’t expect them to make a lot of changes and invest in these technologies until they can validate that they will experience a return on investment quickly, and we’re not there yet."
On the subject of other changes he sees coming in the next few years, he expects there will be increasing use of Artificial Intelligence (AI) as more business services are automated through the cloud.
He admitted that he is not a big fan of blockchain with regard to real estate, but thinks it will have applicability, perhaps with a blockchain certification, or seal, placed on some data packages.
"Nevertheless," he continued, "technology is going to be very important. I think if I could give you any advice at all, it's to be aware, to pay attention, and to make sure you can validate your cyber security right now. Be cognizant of what's happening and stay abreast of it. I don't think you have to lead the charge, but you need to know what's going on."
3. Consolidation in Title
His third and fourth concerns involve consolidation.
"You're going to see a tremendous amount of consolidation in our industry," he said. "It's going to start this year within the title insurance industry. We have a tremendous amount of agents and underwriters, and I do think that the downturn in the market, with refis abating, is putting economic pressure on companies that will result in some consolidation."
4. Consolidation in Real Estate
"You'll also see real estate industry consolidation," he continued. "Lenders, Realtors and title companies will become owned by a single entity. A lot of us have wondered why that hasn't happened sooner, and there are a lot of reasons for it from the regulatory point of view. But I think you're going to start seeing industrywide consolidation occur, probably within two to three years."
5. Regulation
He then offered commentary about regulatory issues.
"You know that the title insurance industry candidly has benefited from the fact that we pay very low premium taxes," he admitted. "So consequently we're not a large part of any insurance department's revenue stream and we don't get a lot of attention. I can guarantee you that will change as you see more consolidation in the real estate industry. And I do believe that you are going to see more data calls and more regulatory examination of our rates.”
"And, liability-based pricing, as I've said for a long time, can't go on forever," he said. "I’ve been surprised how long it has gone on with minimal changes, but I do think you’ll see liability based pricing impacted and modified by some loss analysis through data calls and industry stats. There will still be some relationship to risk assumed, but you won’t see higher premiums on repetitive insurance of the same property. Reissue rates aside, our overall premiums realized are impacted meaningfully through property price appreciation, even with the risk profile mitigated by multiple exams of the same property.”
To watch the full hour-long WFG Q1 “Quarterly Economic Outlook” webinar click here, or visit https://wfgtitle.com/news/.
Link to this for “click here” hyperlink: https://vimeo.com/681866519.
About Williston Financial Group
Williston Financial Group (Portland, Oregon) is the parent company of WFG National Title Insurance Company, WFG Lender Services, WFG Default Services, Valutrust Solutions, LLC, WEST, and other title, settlement and technology solutions providers. It is one of the fastest growing national title insurance and settlement services providers in the mortgage and real estate services industry.