Say Yes To Title Insurance

For quite a few days now, I have been enjoying a history of the Indian Civil Service penned by one of its later members, Philip Mason. Thanks to my donors, I have managed to procure the original two volumes of his The Men Who Ruled India, published in 1953, under the pseudonym Philip Woodruff. In India, the single volume being sold is an unsatisfactory condensation.

What emerges from this reading is that the highest priority of the British government was land records.

It was therefore with a deep sense of regret that I read of what is the legacy of the IAS, socialist successors of the liberal ICS. In an extremely pertinent column on title insurance, Madhumita D Mitra writes:

In the words of one international title insurance major, as a potential title insurance market, India is a car crash. Fragmented land holdings have been left unattended by surveys and settlements almost since the British left this country. Mutations have piled up and land records have not been updated for decades. The present system of recording of rights is only “presumptive” which means that the person paying the property/revenue tax shown in the land/property record is just presumed to be the owner of the property. In case of a dispute, it still requires the courts to establish ownership. Transfer of property deeds may be registered, but such registration refers to the document alone and does not validate the ownership.

The term “car crash” is accurate. Mason speaks of how Congressmen eager to take over The State in the 1940s were like those who want to drive a car without learning how to do so. They caused the car crash.

Do read the full column here. Mitra talks about a proposed government guarantee to property titles – and how private title insurance is a far better idea. Unfortunately, the insurance regulator is playing spoilsport. To quote Mitra again:

For any title insurance scheme to succeed in India, a lot will depend on how progressive and adaptable the government and the insurance regulator are to this new concept. Mr. Philip Oldcorn, CEO of First Title, UK, which is working with the United India Insurance Company on a title insurance product for the commercial market, is appreciative of the concerns of the regulator that it needs to worry about the management of liabilities of the insurers in this niche and brand new area of insurance. Officials at National Insurance Company who failed to get their title insurance product past the IRDA however, feel that the regulator should stick to ensuring that insurers maintain their solvency margin requirements under the law and let the companies mind their own bottomlines.

I wholeheartedly agree. Indeed, private sector title insurance can play the role of an effective watchdog over government title guarantees. The insurance regulator should not block the development of a title insurance market.