The Texas Insurance Department has adopted Procedural Rule P-53 regarding rebates
and discounts. The statutory basis for the rule is Art. 9.30 of the Texas Insurance
Code, which talks about rebates and discounts. The effective date for P-53 is
April 1, 2004.
Below is an explanation of the issues covered by P-53:
WHAT TITLE COMPANIES ARE COVERED BY THE P-53?
All title insurance companies, title insurance agents, direct operations and
all escrow officers and all of the officers, directors, agents, employees, members
of their immediate families of the title companies. All of these people are
called Authorized Persons under the rule.
WHO ELSE IS COVERED BY THE RULE?
Producers of title insurance business. This means all real estate brokers
and agents; all lenders, mortgage companies and mortgage brokers, all builders
and developers, all attorneys and architects and their officers, directors,
agent, or member of their immediate family and people who own or control or
is owned or control by any of them.
WHO IS THE IMMEDIATE FAMILY OF THE PRODUCER?
The term generally refers to husband and wife, children and brothers and sisters.
(See Black's Law Dictionary, 6th Edition).
IS A TITLE INSURANCE AGENT A PRODUCER?
When the title insurance agent is receiving any thing of value from its underwriter,
it is not a Producer.
Comment: A title insurance agent could be a producer if the agent is
buying or selling real property. Questions of rebating between a title insurance
company and its title insurance agent are handled under division of premium.
WHAT CAN'T THE AUTHORIZED PERSON DO?
They can't, directly or indirectly pay for or subsidize advertising or promotional
materials or activities of a Producer. Directly means from one of the people
in the list above. Indirectly means giving the money to an unrelated third party
for them to pay the producer.
WHAT KINDS OF ACTIVITIES ARE PROHIBITED?
Individually or jointly advertising any particular property or group of properties
when the activity subsidizes the business or promotional activity of the Producer.
- Signs advertising a property or group of properties, electronic or hard
copies of advertising media describing, promoting or advertising a property
or group of properties;
- Boxes with materials about the property or group of properties
- Conducting, sponsoring or promoting or paying an part of an event for the
- Examples are: open houses, holiday parties, seminars, lectures or receptions
or convention events.
Comment: This section of the rule applies to activities such as "Home
for Sale" signs, or signs advertising or promoting a subdivision. It also
applies to the information boxes placed in from of homes for sale. It also applies
to open houses at a particular home or model home for the subdivision as well
as events held at a Producer's office. It does not apply to sponsoring an event
for the Board of Realtors, Mortgage Bankers or similar group.
- Providing or paying for any advertising medium that subsidizes the business,
products, services or promotional act ivies of the Producer.
- Providing or furnishing prizes, food, beverages, gifts, decorations, entertainment
or professional services.
Comment: This section deals with anything that assists the Producer
in his business activities. It would include private newsletters, booklets,
business cards and stationary, signs for vehicles, flyers, handouts and listing
WHAT ELSE CAN'T AN AUTHORIZED PERSON DO FOR A PRODUCER?
Provide or pay for furnishings, office supplies, electronic or hard copy documents
or media, computer hardware or software, telephones or telephone systems, copiers
or fax machines, office equipment, vehicles or administrative, management or
staff services, rental or office facilities.
Comment: Most of the things in this list have the normal meaning. Administrative,
management or staff services would include secretarial services, book keeping
or accounting or escrow services, payroll or human resources services, marketing
staff and courier or delivery services, audit services and data process or informational
WHAT ABOUT COMMERCIAL FREE SPEECH?
Can't I sell listing packages or do printing for my customers? An Authorized
Person cannot provide listing packages or do printing for anyone except for
themselves. They can produce and distribute promotional and education materials
about title insurance, loans, and mortgages, real estate matters generally and
laws and legislation provided the name of the Authorized Person is set out prominently
on the cover and first page of the materials. The materials may not contain
the name or symbol of a Producer.
Comment: This section effectively eliminates the ability of an Authorized
Person to jointly advertise with a Producer. It also eliminates the ability
of the Authorized Person to do printing for a Producer. The Authorized Person
can provide educational matters about the title business and related topics
but there can be no co-branding.
CAN I GIVE A FRIEND A GIFT OR CAN I GIVE A CUSTOMER A "THANK YOU"
If the person is actually a friend, that is a person with whom you have an
outside of business relationship, and you have given them gifts in the past,
you can continue to do so. But you can't tie the size of the gift to any amount
WHAT ABOUT THE SO CALLED "BLENDING OF RATES"?
The rule requires that if a transaction involves property in one or more state
and at least one property is in Texas, the Authorized Person must charge a rate
for the non-Texas property that does not violate the laws of that state and
may not discount or reduce the rate in a manner that constitutes a thing of
value in Texas.
Comment: Any transaction involving a Texas property requires that the
Texas promulgated premium be charged and collected for the value of the Texas
property. It is up to the underwriter to follow the rules on setting rates in
HOW DO I PROVE THAT I AM COMPLYING WITH THE RULE?
The rule requires that the Authorized Person keep records in a form that can
be audited by the TDI.
Comment: Every expense request or receipt for marketing materials should
be marked as to whom the materials were requested or given. You should keep
a copy of every piece of written material you provide to a Producer. An underwriter
may provide written materials to its agents and the materials can be co-branded.
Any gift should be documents as to the value and the person to whom it is given
and the date on which it was given.
ARE THERE PENALTIES FOR VIOLATING THE RULE?
Yes. The Department can levy a civil penalty up to $10,000 per violation and
for each day of the violation. An Authorized Person can lose their license or
certificate of authority for later or repeated violations.
Comment: The Department also can levy a fine up to 3 times the value
of the material.
The Commissioner's Order says that the Department will not define the parameters
of advertising exceptions or other actions but will use a "common sense
policy to direct enforcement actions at substantially significant violations
rather than matters of de minimis importance". The Department "urges
title agents and title companies to comply with the rule and not to attempt
to circumvent it." Exactly what these statements mean we are not certain.
However our advice to you must be that if you are asked to do something that
would be costly (not de minimis) or which you would not want to justify to the
Commissioner, you simply should not do it.