At the 2024 National Settlement Services Summit (NS3), industry leaders gathered to discuss the evolving relationship between underwriters and agents, highlighting transformative offerings and the pressing need for adoption of new technologies.
The underwriter panel, moderated by David Townsend, senior vice president, agency division manager at Fidelity National Financial, featured insights from Don Kennedy, senior vice president, national agency division at First American Title Insurance Co.; Pat Stone, executive chairman and founder of WFG National Title Insurance Co.; and Jeff Bluhm, executive vice president at Old Republic Title.
Embracing change
Townsend opened the discussion by asking Kennedy about the changes he’s seen in the underwriter-agency relationship over the past 15 years.
Kennedy highlighted three key areas of evolution.
““Number one, I think agents look to us to help them grow, grow their business,” he said. “And that can be in the form of us, an underwriter, literally printing marketing materials that salespeople can take out into the field. It can be, through technology platforms, farming tools, things like that”“. So, we’re looked at as sort of consultants towards growth.
“The second area is back-office support and risk mitigation. Underwriters are now expected to be able to produce a search package that ’they’ll stand behind. Underwriters provide wire fraud prevention tools now to mitigate the risk of losses to agents and consumers. There are growing expectations for underwriters to protect agents, particularly with the rise in wire fraud.”
Education was the third aspect of evolution.
““We’re now being asked to help our agents have conversations about title insurance alternatives, like attorney opinion letters,” Kennedy told attendees. “I think ’it’s incumbent on underwriters now to arm agents with information and arguments that they can use to have conversations with their customers, to advise them on the hazards of these alternatives.”
Biggest needs
Bluhm was asked about the most transformative offerings from underwriters in recent years and highlighted the pivotal role of technology
“I suspect it has to be technology, but I’m not sure we can get everybody to agree on what that one piece of technology is,” he said. “As far as the process of underwriters identifying agent needs and delivering tailored solutions, if the underwriter is asking the right question, listening intently and then going back to work on it and delivering on it and doing that time and time and time again, you can be a more successful agency.”
Stone discussed the primary needs of agents, particularly in purchasing.
“We have a (WFG Blocks) program and in that blocks program, I think purchasing is probably the number one item,” Stone said. “We have a relationship with profit recovery partners so we can aggregate the buying power of all our agents and get them really good prices on printers, copiers, any sort of office equipment, paper, shredding machines, whatever they need.”
Townsend added, “One thing our agents are asking for is knowledge, information. How can I know more about how my business works, the metrics? How can we be more consultative on looking at their business, looking at the numbers? How can they be more efficient?”
Kennedy acknowledged the heightened demand for sophisticated financial advice.
“Our organizations have highly sophisticated finance talent, and an apparatus, by which they can take complicated things like valuations, distill them down into advisors on strategy, such as asking, ‘Do you want to sell?’ Do you want us to help you with succession planning?” he explained.
Cybersecurity and wire fraud
The panel also covered cybersecurity, a critical concern in the industry.
In the fourth quarter of 2023, wire and title fraud risk reached an all-time high with more than half of transactions having at least one issue that led to increased vulnerability, according to data from FundingShield.
Stone emphasized growing scrutiny from lenders.
“The lenders are becoming much more focused on verifying that the title company they’re doing business with has a cybersecurity program, a cybersecurity audit, and that their interests will be protected,” he said.
Townsend reiterated the importance of a verifiable program, stating, “It’s almost worse to have the plan and not implement it than to not have a plan at all.”
Bluhm discussed resources for agents.
“We try to create other relationships around the country with cybersecurity experts that we can introduce to our agent base,” he said. “When it gets to the nuts and bolts of creating that plan, testing that plan, rehearsing, they’ve got expertise that they can call on. Make sure all your employees are aware of it and practice it.”
Kennedy offered practical advice for preparing against cyber threats.
“Phish test your employees,” he said. “Try as hard as you can to get your employees to click on a link they shouldn’t click on. That is the easiest way to identify your greatest vulnerability, which is human fallacy.”
Townsend added, “Look at how you access your systems and think, how easy is it for me to get into my email? If it’s easy for you to get into your email, it’s easy for a hacker to get into your email.”
The panel agreed on the importance of partnerships in overcoming industry challenges. Kennedy highlighted the resilience of the industry, stating, “Evidence of the strength of our industry is that during this most recent downturn, I thought I’d see a lot more agencies go out of business. It hasn’t happened, which to me means they are outsourcing. They were ready for this downturn.”
Preventing and responding to fraud
Kennedy emphasized the importance of addressing wire fraud without hesitation.
“The number one piece of advice I would say is not to be embarrassed if it happens,” he said. “There’s that tendency to say, ‘Uh-oh, we got hit,’ and look at that as a personal failure or a failure on behalf of management or the company at large. It’s not. Just go immediately into solution mode.”
Echoing Kennedy’s sentiment, Bluhm highlighted the urgency of responding swiftly to potential fraud incidents.
“If you respond very, very quickly, a lot of times you can save yourself because typically, you’ve got about 24 hours that you can still stop the funds at the bank,” he said. “So, jump on it immediately.”
Stone added that notifying underwriters promptly can activate a network of resources to assist agents in recovery.
“Let your underwriter know,” he said. “We’ve all got resources that can help you. We’ve had our claims people involved, of course, we get our treasury people involved, because we may have a relationship with the bank that you use. We have a lot of experience responding to these things. Let your underwriter know as quickly as possible.”
Townsend underscored the value of vendor partnerships in these situations.
“Don’t be afraid to ask for help from vendors you might use for protection, even if you didn’t use it on that file,” he said. “I had an agent call yesterday that had a $125,000 wire diversion. They didn’t use their usual vendor, but the agent called them and they were able to get $95,000 of it back.”
Choosing the right vendors
When selecting vendors, Bluhm advised agents to ask critical questions to ensure they choose reliable partners.
“What’s at stake if something goes wrong with this vendor regarding the application or the service that they provide?” he asked. “You look at the background of the vendor, how long they’ve been in business, why they’ve been in business, the stability of the product, the uptime on it, and how many users it has. All those kinds of things can help you get a good understanding.”
He also stressed the importance of personal rapport.
“Did I hit it off with them? Are they going to become my new friend? Because I want to be able to trust them,” Bluhm said. “And it would be nice if maybe they would give up some reference information.”
Role of technology and AI
The discussion also touched on the role of technology and artificial intelligence (AI) in enhancing security and productivity.
Kennedy noted increased adoption of wire fraud prevention tools across the title industry.
“Just adopting the wire fraud prevention tools is the one that more people are hopping on board, given the ever-growing prevalence of those threats,” he said. “I’ve heard a couple of descriptions of AI that I really liked. One is that AI should be looked at as an army of interns. It’s going to enhance productivity. Another is that AI is like an over-eager intern. These large language models want to provide you with an answer, so you have to be cautious because they can make things up.”
AI’s practical applications were demonstrated in a personal anecdote from Kennedy.
“I was asked to write a welcome letter incorporating a Harry Potter theme,” he said. “I’ve never read Harry Potter, so I used ChatGPT. It spit out a good first draft, and when I asked for more Harry Potter, it gave me what I needed. What would have taken me an hour took less than five minutes.”
Despite the benefits, panelists advised treading carefully when integrating AI into business operations.
“These tools have improved dramatically, but you have to be cautious,” Townsend said. “Proceed with caution when adopting AI tools, which we are doing in our company, integrating them into our systems.”
Stone added a broader industry perspective on AI.
“AI has been around for a long time and used in this industry for over 20 years,” he said. “Instant title products are an application of AI. Its effectiveness depends on the quality of your databases. Where we’ve had really good, automated title plants, we offer really good instant title.”
Townsend further emphasized the role of training.
“(AI) is just like an employee,” he said. “If you tell somebody off the street to do a title thing, they won’t know how to do it unless you train them first.”
Title waiver pilot
Toward the end of the session, panelists highlighted the need for heightened awareness and advocacy within the industry regarding the proposed title waiver pilot by Fannie Mae and the Federal Housing Finance Agency.
“We just want to help with homeownership in general because it results in so many, many, many good things,” Bluhm said. “We try to keep (regulators), as best we can, aware of what’s happening and provide relevant facts that talk about reality rather than the hype and the smoke and the mirrors.”
Stone, reflecting on his meeting with Fannie Mae, said the industry continues to struggle with communicating its value.
“The real estate community as a whole does not understand title insurance, our loss record, and what we do to eliminate losses,” he said. “There’s a real and significant gap in understanding here, one that the industry must work diligently to overcome.”
Kennedy reinforced the importance of political engagement.
“If you ever have been inclined to get politically involved, this is the time to do it,” he said. “Industry professionals must join forces to protect their businesses and the integrity of their services.
Townsend acknowledged the variability of business practices state to state.
“The business practices around the country are so dramatically different and for some reason that regulators haven’t figured that out,” he said. “This diversity presents both a challenge and an opportunity for the industry to adapt and advocate effectively.”
Ultimately, the panelists agreed on the necessity of unity.
“It’s going to be really interesting to watch this unfold,” Bluhm said. “The industry’s response to these challenges will shape its future, and the best response will be staying informed, engaged and united in advocacy efforts.”