[chollida1]

> Title insurance is a much bigger scam/cost.

I wouldn't cut out Title insurance, I have two friends for whom it saved low 7 digits each due to fraud in one case and liens in another.

It's incredibly important in today's market and I can't see how you can call it a scam, unless you also view car/health/life insurance as a scam as well, in which case we just disagree:)

[flerchin]

It could be handled with a government maintained database for orders of magnitude less resources. There should not be giant title insurance buildings in every city.

[chollida1]

Ok, so if someone impersonates me and sells my home and runs off with the money this is one scenario that title insurance covers my losses. How does a government database help in this case?

This is a scenario that happens more often than you'd think with empty condos and a foreign owner who isn't around to look after their property.

You'd still need title insurance even though you have a "government maintained database"

[flerchin]

That scenario is in fact not covered by title insurance. Title insurance would be for the schmuck who bought your house.

I'm not saying that the function of title insurance companies would go away, but it would largely be obviated by an accurate single source of truth for land titling, and yes some insurance function that the government could provide for a much smaller fee.

[chollida1]

It is indeed covered as I've had a personal friend have to use it for that reason. The buyer got to keep the house and the old owner had title insurance pay them for the loss of their home.

[short_sells_poo]

I think what parent actually means is that there are better solutions for it than insurance. E.g. a central registry of ownership and liens would probably solve 99% of the cases that you need insurance for. The insurance is a scam in the way that there are technical solutions that would obviate the need for this "service", but that solution is against the interests of the service providers. Very much like tax returns, which are a solved problem in many countries for the majority of the population because the authorities already have all the data they need. Most people should not need to faff around with them. In the US however, the tax return lobby is strong and effectively prevents the government from making it easy...

[JackFr]

In those cases where the government handles recording all transfer, there is typically a fund which covers loss due to fraudulent or erroneous transfers. Thus there is still title insurance, it's just hidden from view.

[supertrope]

A lot of Americans would rather pay $1000 to a private service than $900 in higher taxes. It's the principle of the matter. Government bad. Privatization, "choice" between the oligopoly businesses, and public-private partnerships good.

[hnburnsy]

It is a scam for two reasons...

1) The premium to risk cost is astronomical compared to other forms of insurance.

2) The owner's policy really only protects your equity (like if you put down 20%) but costs more or the same as the lender's policy (the other 80%)

Payout rates by insurance type:

title insurance - 1-2%

car insurance - 70-80% (lately close to 100%)

life insurance - 96-98%

homeowners - 60-70%

[hnburnsy]

Amongst the reasons it is a scam are...

1) The premium to risk cost is astronomical compared to other forms of insurance.

2) The owner's policy really only protects your equity (like if you put down 20%) but costs more or the same as the lender's policy (the other 80%)

3) 80% of the costs are paid to the agent as a commission

[lenerdenator]

> health insurance

The way it's implemented in the US, it absolutely is.