Insurer’s Annual Onsite Review

PURPOSE: This regulation prescribes requirements for the minimum threshold level of review, standards of review, and the approved review report to the director for the insurer’s annual on-site review of title agencies or title agents. This report to the director is a review report and is not intended to limit the actions of insurers in performing more detailed reviews. (1) Annual On-site Review Required Under Certain Circumstances. (A) Insurers must conduct in each calendar year, after the initial contract year, an on-site review of agent/agency practices for each agent or agency that is currently appointed as a policy issuing agent. A report of such review shall be made to the director pursuant to subsection (2)(A) of this rule. (B) The on-site review required under this rule constitutes minimum insurer review levels. (2) Standards of Annual On-site Review. Insurer shall conduct an annual on-site review of underwriting, claims, and escrow practices of agencies where commitments and/or policies of the insurer have been issued that is reasonably designed to detect violations of Chapter 381, RSMo, compliance with the Issuing Agency Agreement and compliance with the underwriting standards and guidelines as established by the insurer. The insurer annual on-site review shall provide, at a minimum, for the following: (A) Underwriting Practices and Claims. The title insurer shall review the agency’s adherence to its established underwriting standards. The title insurer shall review the agency’s procedures for notification of claims according to the terms of the Issuing Agency Contract between the title agency or agent and the insurer and the terms contained in the insurer’s policies of title insurance; (B) Insurer Remittances. Each on-site review shall verify that the funds held on behalf of the insurer are reasonably ascertainable from the books of account and records of the title agency or agent and are sufficient to satisfy the obligations of the title agency or agent to the insurer. Each on-site review shall verify that remittances are being paid to the insurer by the policy issuing agent in a timely manner in accordance with section 381.038.3, RSMo; (C) Insurer-Agency Contract. Each on-site review shall include a review of the title insurer and title insurance agency/title insurance agent contracts to ensure a) the contract sets forth the responsibilities of each party and, when both parties share the responsibility for a particular function, specifies the division of responsibilities, and b) the contract is up-to-date and properly executed; (D) Annual Statement. The title insurer shall obtain from the title insurance agent, or from the title insurance agency if the title insurance agent is employed by a title insurance agency, a statement of financial condition of the title insurance agent or title insurance agency as required pursuant to section 381.023.2(2), RSMo, which includes an income statement and balance sheet or federal tax return showing the condition of the title insurance agent/agency affairs as of December 31 of the preceding year, or fiscal year. This statement of financial condition shall be certified by the title insurance agent or the title insurance agency’s designated agent as being a true and correct representation of the financial condition. The title insurer shall document its receipt of the title insurance agent’s or title insurance agency’s statement of financial condition in the title insurer’s on-site review report and shall maintain the documentation provided by the agent/agency in support of such statement for a period of at least four (4) years; (E) Affiliated Business. The title insurer shall review the title insurance agent’s affiliated business arrangements for conflicts of interest and regulatory compliance; (F) Orders. Each on-site review shall reconcile the title agency or agent’s orders with commitments, title searches, and title policies of the insurer, and collection of premiums on behalf of the insurer; (G) Commitments. Each on-site review shall include a review of: 1. The title insurance agent’s procedure for tracking issued commitments of the insurer; 2. The title insurance agent’s practices relating to cancellation of commitments of the insurer on transactions that do not close; and 3. The title insurance agent’s procedures for follow-up after closing to track status of outstanding conditions required for timely issuance of policies of the insurer; (H) Voiding Policies. Each on-site review shall include a review of the title insurance agent’s procedure for voiding policies of the insurer according to the terms of the Issuing Agency Contract and other guidelines as may be established from time-to-time by the insurer; (I) Escrow, Security, and Settlement File Tracking. Each on-site review shall include a review of the title insurance agent’s tracking of its open escrow files, security settlement, or closing files where commitments or policies of the insurer have been issued; (J) Policy Register. Each on-site review shall include a reconciliation of policy jackets provided to the title insurance agent by the insurer, compared to existing outstanding inventory and policies of the insurer issued by the title insurance agent; (K) Policy Issuance. Each on-site review shall include a review of the title insurance agent’s files, where commitments or policies of the insurer have been issued, to determine the average length of time between the issuance of the title policy and either all of the requirements to insure have been met or special circumstances for policy delay as contained in 20 CSR 500-7.090 have been met; and (L) Escrow Practices and Account Reconciliation. For those agents performing escrow, security settlement, or closing services pursuant to section 381.022, RSMo, the title insurer shall review the title insurance agent’s closing procedures and shall include a sample of escrow closing files where commitments or policies of the title insurer have been issued, and based upon the findings of a review of the monthly reconciliations of all of the fiduciary trust accounts, as certified by the title agent or agency to the insurer, prepared by the title agent or agency. The review shall include a determination of compliance with the following: a) use of escrow agreements; b) adherence to the “good funds” requirements; c) deposit practices; d) disbursement of funds in compliance with written instructions; and e) recording of all deeds, releases, and other documents required of the title insurance agent. (3) Insurer’s On-site Review Report (Form T6A and T-6B). (A) Insurers conducting an annual on-site review are required under section 381.023.4, RSMo, to report the findings to the director. This report shall be made utilizing the Insurer’s On-site Review Report form (Form T-6A) and Title Insurer’s On-site Review Sampling Methods (Form T-6B), or any form that substantially comports with the specified form. (B) Review Reports T-6A and T-6B shall be submitted to the director within one hundred twenty (120) days of the completion of the review, except that findings relating to Section 14, Escrow Practices and Account Reconciliation, of Form T-6A, that do not comply with the escrow standards of the insurer, shall be submitted to the director within ten (10) days of verification of such findings. (C) The title insurer shall complete Form T-6B for each title insurance agent on-site review report. Form T-6B shall be deemed by the department to be a trade secret as defined by section 417.453(4), RSMo, inasmuch as such data possess economic value by virtue of its confidential status, the same or like information is unavailable through other sources, and insurers have made reasonable efforts to maintain the confidentiality of the data. As such, Form T-6B shall be considered confidential communications and immune from requests made under Chapter 610, RSMo, nor shall such data otherwise be made available to the public or unauthorized individuals except in the manner and form prescribed by this rule. AUTHORITY: section 374.045, RSMo 2000 and sections 381.023 and 381.042, RSMo Supp. 2008.* Emergency rule filed Oct. 15, 2008, effective Jan. 1, 2009, expired June 29, 2009. Original rule filed Oct. 15, 2009, effective June 30, 2009. *Original authority: 374.045, RSMo 1967, amended 1993, 1995, 2008; 381.023, RSMo 2007; and 381.042, RSMo 2000, amended 2007.