Mr. Hunter testified that the title insurance industry engages in “reverse competition through kickbacks. Just making these payouts illegal did not work. The incentive must be eliminated completely.”

Specifically, Mr. Hunter said, data supplied by the industry shows that title insurers pay about 5 percent of premium dollars on claims, compared with about 80 percent for auto and home insurers.

He said that between 1995 and 2004, title insurance loss ratios averaged 4.6 percent, and the loss ratio was below 5 percent in eight out of 10 years. For example, he noted, First American Title received $3.4 billion in premiums in 2003 but paid only $41.7 million in claims–a 1.2 percent loss ratio.

Ms. Toll, representing the National Association of Insurance Commissioners, along with officials of the U.S. Department of Housing and Urban Development, which regulates real estate transactions, backed Mr. Hunter's contention that problems exist in the industry.

Title One's Mr. Miller said that in his state of Minnesota, “the playing field is not level,” explaining that “the title insurance industry and the real estate industry have locked up almost the entire marketplace through controlled-business schemes.”

“The culprit goes by many names–'affiliated business arrangements,' 'controlled business arrangements,' 'one- stop shopping,' 'ancillary services' and 'bundled services' are a few,” he said. “The terms all mean the same thing–steering real estate consumers into overpriced ancillary services for secret profits.”

“Controlled business is now estimated to be involved in over 90 percent of all residential real estate transactions in my area,” he added.

Representatives of the realtor industry and others representing the title insurance industry defended their practices.

Thomas M. Stevens, president of the National Association of Realtors, said realtors have not found illegal practices among title insurance providers. He said his group has not seen predatory pricing that would involve rates being cut or put below cost in order to drive out companies from the market. Nor has NAR observed limit pricing/rates, which he defined as setting a price low enough to discourage entry.

He also reported no finding of price discrimination that would involve charging one group of consumers a rate higher than another based on cultural or social factors.

Any such practice in the title insurance market would not only be unlawful, but would also be “indicative of a concentrated, anti-competitive industry,” Mr. Stevens said.

Rande K. Yeager, president and CEO of Old Republic National Title Insurance Company, speaking on behalf of the American Land Title Association, testified there is a misconception “that there is a lack of competition in the industry. That is simply not the case. Not only do title insurers actively compete for market share against other title insurers, but insurers compete against agents, and agents compete against each other.”

Indeed, Mr. Yeager said, “the fact that certain companies have engaged in questionable marketing practices under RESPA [HUD's Real Estate Settlement Procedures Act] only demonstrates how cut-throat the competition for market share is in the title insurance industry.”

Ms. Toll, who has been a leader among regulators in probing questionable activity by title insurers, said Colorado investigators found that three of the top four companies offering title insurance in the state were involved in questionable referral practices.

She told the committee that state insurance officials are trying “to uncover and address pervasive kickback schemes within the title insurance industry.”

“State insurance officials are working aggressively to uncover and prevent improper business practices by title insurers and agents,” she said. “We have imposed penalties, ordered restitution and shut down sham business arrangements.”

Members of the congressional subcommittee all argued that illegal kickbacks and sham business agreements need to be eliminated, although opinions varied regarding the extent of the problem.

Rep. Gary Miller, R-Calif., noted that pricing in the title insurance business is generally based on the price of the property being sold and does not account for potentially wide disparities in the property being insured. “It doesn't matter how extensive the title search is, or how limited–the price is pretty much the same,” he said.

Prior to coming to Congress, Rep. Miller said he was himself involved in the real estate business and had actually performed title searches. In his time in the industry, he said he had never been offered any form of illegal payment, adding that, “I don't know a realtor who has been, and I don't know a builder who has been.”

Rep. Patrick Tiberi, R-Ohio, also questioned the extent of the problem, noting that real estate agents who steer customers to a higher-priced title insurer for their own benefit would likely end up hurting themselves by tarnishing their reputations.

Ms. Toll pointed out, however, that any problems with a property's title would likely not surface until the customer wanted to re-sell the property, which could be years later.

In response to questioning from Rep. Randy Neugebauer, R-Texas, Ms. Toll said that the problems in the title insurance industry are not limited to her state. “Sadly, it's a problem we're seeing across the country,” she noted, adding that illegal practices are more concentrated in areas with more robust real estate markets, such as Florida, Nevada and California.

Current law already prohibits real estate agents from taking kickbacks or other compensation for title insurance referrals, and Rep. Miller questioned whether adding more penalties would be effective. “How many hammers do you need to beat up the same guy?” he asked.

Rep. Mike Oxley, R-Ohio, who chairs the full Financial Services Committee, expressed his view earlier in the hearing that simply calling for tougher enforcement of current law would likely not be enough to resolve the problem. “I don't believe the lack of price competition is something we can enforce our way out of,” he said.

Rep. Oxley also took a different perspective on title insurance pricing, noting that while real estate prices have gone up, bringing title insurance premiums up with them, the actual process of researching a title has been made simpler by technology.

“If a house has doubled in value, does it really take the real estate agent twice the work to sell it? Or the title service company twice as much to run the automated title search?” he asked.