Top Three Underwriting Risks in Title Insurance: Identifying Risks and Implementing Internal Controls
Purpose: This article aims to provide insights into three key underwriting risks and relevant internal controls for risk management and internal audit practitioners in the title insurance industry. Design/Methodology/Approach: The article explores in detail the three key underwriting risks faced by title insurance companies and discuss the corresponding internal controls that practitioners may consider employing to effectively manage these risks. Findings: There are several risks involved in drafting and submitting the policy during the underwriting process, which can have significant implications for the title insurance company. One major risk is the potential for human errors in drafting the title insurance policy. If the policy template is not properly designed to reflect the title research’s findings accurately and completely, the title insurance company may be exposed to unexpected risks or liabilities. Another critical risk involves the use of ambiguous policy language. When the language in the policy is not clear and precise, it can lead to significant interpretation issues. Practical Implications: When potential errors and fraudulent activities is identified and addressed at an early stage, title insurance companies can safeguard their financial stability, allocate their resources more efficiently and minimize the defalcation costs that may impact their bottom line. Originality/Value: The disputes as explained in the article can be lengthy and expensive to resolve, further increasing the company’s financial exposure.