How AI & Automation Are Transforming Title Insurance | Ep 1

Most every title agent has multiple underwriter relationships and you can capitalize on the lessons they've learned. So be careful, but be open minded and take a hard look at everything going on around you. Don't get stuck fighting the control battle. In a world where change is the only constant, Mo Shumil stands at the forefront, guiding title professionals to not just grow their businesses, but to master the art of innovation. With every episode, you're handed the keys to unlock unparalleled growth and stay ahead of the curve.

Get ready for a transformative journey. Hello, welcome to the Title Agents Podcast. I'm truly honored and privileged to have such a fantastic, wonderful guest. He's a legend in our industry, Mr. Patrick Stone.

Patrick, do you like to be called Patrick or Pat? Pat is fine, Mo, and I'm honored to be here. It's a pleasure to be associated with you and be on your show. Thank you. Awesome.

Thank you. Let me read a little bio about you just as part of honoring you and your history. Patrick Stone is the founder and executive chairman of WFG. It's one of the six national title insurance underwriters in the United States. Born in 1947, Pat Stone served in the Vietnam War before attending Oregon State University, where he developed interests in history and art.

He spent over two decades rising through the ranks at major title companies like Stewart and Fidelity before becoming the president and COO at Fidelity. In 2010, Pat founded WFG with the goal of bringing more efficiency and transparency to the title insurance industry through innovative technology like e-clothings. Under his leadership, WFG has grown rapidly to become a national player, earning top ratings for its financial strength and stability. Welcome, Pat. Thank you, Mo.

Appreciate you having me. The first thing that stands out off the bat in your background, how did you go from art and history to title insurance? Well, I dabbled a little in grad school and I didn't fit very well. I was looking for a job, saw an ad for a title examiner trainee. I had no idea what it was, but I needed a job.

So I took it and got started in the business. I was a title examiner for a while. It was interesting. I posted a geographic slip plant, did a lot of courthouse researching. I think at that time, I thought it was moving a little bit too slow for me.

So I went off and became a stockbroker. I did that for a couple of years and I didn't like that at all. They hadn't invented the word fiduciary yet. And everything went. And anyway, so then I decided I didn't like that.

But the guy I had worked for before offered me a job to come back to the title agency. This was a small title agency in Hillsborough, Oregon. And I said, okay. So I went back and he said, but I want you to get into sales. And I'm going to share this story with you because it's a lesson that I think we all learn one way or the other.

But I had gotten some great sales training on Wall Street. I spent a lot of time overcoming objections. I was good at it. But I found that what really made my career take off was my first wife, who were still friends, she said, don't come home without an order. So I would drive around looking for a realtor offices with lights on after dark and figure if the lights on somebody's in there working on a deal and I'd go in and I'd say, hi, and you're working on a transaction.

They say, yes, but it's not with your firm. And I said, well, let me look at the preliminary title report. I'll tell you if there's anything you should worry about or address before you get to closing. And they always go, why would you do that? And I said, well, it'll help you in case there's something going on.

I've been a title examiner, happy to let you know. So I started doing that. And then I started getting calls from people. But my point here is I was adding value. I was helping them.

I was helping them be successful. And it got me a tremendous amount of business. I got so much business, I couldn't handle the business I was getting. But that's what really launched my career. So I should give you credit for the search and hold custom in the West Coast.

I know that insurance is different in different parts of the country. That's for people in the East Coast and Midwest that may not be used to search and hold. So I started with you. That's a great value add. Yeah, there's always some way that you can help your clients or your prospective clients be more successful.

And talking about your company or we give great service doesn't mean anything to anybody, right? If you can do something that helps them be more successful, then you're a part of their team and they look at you in a whole different manner and you will get their business. So that evening, your wife let you in, you got an order. What a powerful incentive. So please just give us the progression in your career and how it went from there to guess what's the next company you work for and progression to Fidelity and how you were in.

Well, so I was in sales for a while and we wanted to get into the builder business and I was kind of interested in that. So I started studying the process of getting plats approved and started helping builders get subdivision plats approved and help them getting through all the administrative bureaucracy they have to deal with. So we started getting a lot of builder business. I got to be the sales manager and the agency got sold to Stuart Title. And the gentleman that was the manager ended up leaving and they made me the manager.

The day I became manager of the Stuart Title operation in Portland, Oregon, interest rates were 15.6%. This was in 1983. It was a real lesson in survival. There was virtually no mortgages being done. The SNL industry was dying, basically being killed.

And we looked around how we're going to keep the lights on, how we're going to keep this going. And the one thing that would work would be seller carryback financing. But typically, buyers and sellers were reluctant to use a contract because the buyer didn't know the seller or the seller didn't know the buyer. So we've started a seller carryback servicing department. And we promoted it that, yes, you can use a contract.

We'll make sure that all parties are treated fairly, taxes get paid, et cetera, et cetera, et cetera. So the seller carryback servicing department was phenomenally successful. We started making a lot of money and that helped my career take off with Stuart Title. I was with Stuart Title for almost 10 years. And then, long story short, kind of got caught in the first oil shale crash in Colorado in Denver, had owned part of the operation in Denver, and it went south really bad.

So it was kind of tough. Wanted to go back to Portland, found a company to buy, but I was having a hard time getting the bank to lend me the money. So I knew Bill Foley, had met him a couple of years before. Fidelity, at that time, was doing about 90 million a year total. And I called him up and said, hey, I'll underwrite with you if you'll guarantee my loan.

He said, well, come on down and let's talk about it. Ended up going to work for Bill and Fidelity bought the company. And then I was the top manager of Fidelity for five years and he made me president chief operating officer. Company was doing 400 million and I left nine years later and we were doing almost 4 billion. We bought 69 companies.

It was a lot of fun. How was that experience working with Bill Foley? Bill is probably one of the brightest people I've ever known. He really focused on the financial side, getting the money to make the acquisitions. I focused on the integration and managing of it.

And then when you launched WFG in 2010? Yeah, I retired from Fidelity in early 2004. Bill wanted to move the company to Jacksonville, Florida. And I had a wife and a couple of kids and they didn't want to go. So we decided that maybe that was a good time to retire and got into doing a lot of commercial investing.

My nephew and I have done a lot of warehouses and we did a medical office condo and done a lot of commercial investing and doing a lot of philanthropic involvement. I was chairman of the Santa Barbara Art Museum. I was chair of the Portland Oregon State University Foundation. Anyway, so I was staying pretty busy, but it wasn't the same and decided I needed to get back in the business. I was on the board of First American when I came up with the idea.

I was on the board of First American at the behest of a private equity company out of Boston that was a major shareholder. And I watched the downturn and I watched how the big companies were reacting to it. And I said, there's an opportunity here. So I started WFG first week of 2010 and started it with the idea. I really thought there'd be more change than actually occurred because of the financial upheaval.

But I did think that the industry had to change. It had to become more part of the process, more involved in the process, more integrated with the lenders and the realtors and actually be a little bit more concerned about the clients knowing what's going on. So I thought there was an opportunity. Things haven't occurred necessarily exactly like I thought they would, but the opportunity was there and we've had a lot of fun building this company. Awesome.

I know WFG is private. Can you share with us where WFG is right now as far as size and the markets you cover? We're in every state and we were very methodical in growing the company. We've never had any institutional debt. We still do not have any institutional debt.

And the company is owned by Golden Gate Capital and myself. And we've been really very focused on building something that had a strong financial base and was really built to last. And again, we do about two and a half percent in the national market, but we operate with owned operations in seven Western states in tier one markets that have 50-year automated title plants and very low loss to earn premium ratios. You made a comment earlier, Mo, about how the industry is different all over the country. It is exceedingly different.

Databases are different. Loss experience is different. Business practices are different. As everyone knows, insurance is regulated state to state. So we decided to own operations in seven Western states, service the rest of the country with independent agents, but make sure that we didn't get just caught up in how many we signed, that we actually worked with the agents we have.

And so we service. premium ratios. You made a comment earlier, Mo, about how the industry is different all over the country. It is exceedingly different. I mean, databases are different, loss experience is different, business practices are different.

As everyone knows, insurance is regulated state to state, so we decided to own operations in seven Western states, service the rest of the country with independent agents, but make sure that we didn't get just caught up in how many we signed, that we actually worked with the agents we have. And so we service our, excuse me, I should also add, we have an enterprise solutions group which has been done really well being automated with lenders. We have a appraisal management company, and we have a default services group, and then we have a tech subsidiary called My Home, and we have built the company very methodically, very logically, but in a very sound financial manner. Congratulations, you've done a phenomenal job, and you're my hero. I always say I want to become you when I grow up.

You're not doing too bad yourself, Mo. So how have you seen the industry evolve over the years, and what legacies do you think are essential to uphold for all of us title agents? When I started back in 1975, the industry had just recently evolved into having a few national companies. As you mentioned, and as we talked about already, business is done differently everywhere, so the industry really grew on a local basis. Don Kennedy and Stuart Moore Sr.

were both very instrumental in buying up agents and creating an national platform. That really started to evolve in the late 60s and 70s. We had Pioneer National Title, we had Safeco, we had a couple other players that came and went, but the industry became more of an effort that was focused nationally despite the differences on a local basis, and then I think as a result of that we've had the slow but steady evolution of our trade association, Alta, and I've got to give Alta a lot of credit because it has really started promoting information about the industry that helps. One of the problems we've had is that nobody understands what title insurance is. The first comment they have when they see title insurance is your losses are only five or six percent of your premiums.

This makes no sense. Well, we're not an actuarial business, we're a risk elimination business. We have a lot of upfront expense in order to effectively eliminate risk. Alta has been doing a real good job lately of getting the politicians and the public aware of what we do, how well we do it, and what would happen if we weren't around. I had a meeting with Fannie about a year and a half ago.

One of the subjects we talked about were the losses in the industry. They were stunned when I told them that for the preceding 20 years, the industry had paid out losses of $14.6 billion. They go, no, there's no way, and I said, oh yeah, there is a way, that's what we've paid out, and we do that after all the money we spend on risk elimination. So yeah, go ahead and get rid of us and see what happens. Definitely, we don't do a good job explaining what we do.

It's very labor-intensive, it's expensive. You know how labor is, it's very expensive. It's a unique industry for sure. You want to switch gears here. You're a techie and you're always evolving.

The title industry is constantly evolving as we've discussed. How has WFG managed to stay ahead of these changes and what strategies have you employed to keep the company moving forward? Well, the opportunity that I saw when I started the company still exists, and that is that the real estate process is very fragmented. It's fragmented because all the players report up to different regulatory entities. Business is so distinctly different in different markets, so the industry as a whole is not very integrated or very efficient.

I did a study one time, this is almost 20 years ago, so forgive me, it's probably not exact anymore, but it still is pretty amazing how many times all the information is entered by all the participants on every transaction. A study I did actually was a 2002. We discovered or we were curious about how many times name and address were entered by all the players, the realtor, the lender, the appraiser, the inspector, the title company. On average, nationally, the same data was entered 80 times on every transaction. Wow.

Yeah, what a waste of time and effort, right? And then also, yeah, and then you also have all the errors that come with doing it that often, but that's just the tip of the iceberg. The industry is incredibly inefficient. Each segment of the industry has invested a lot of money in technology, has probably made meaningful progress and becoming more efficient within their segment, but we've got to get integrated and start working together as an industry because, you know, I make a joke, okay, I've been at this 49 years and it's changed a lot. It took 45 days on average to close a deal when I started and it takes 45 days on average to close a deal today.

I mean, this is crazy, isn't it? I mean, we've got a lot of upside potential in this industry. What key innovations or shifts do you foresee impact in the industry the next few years and how is WFG preparing for these changes? Obviously, the big conversation point now and that the press is beating this drum to death is AI. And AI, you know, we've seen automated title used in this industry now for what started Aqua in the year 2000 at Fidelity.

That was the first immediate title report. And that in effect was the first implementation of AI. However, I think, you know, so now we have AI being used. There's a lot of different instruments, a lot of different automated title reports. We've taken AI and our decision point product and actually applied that across the process.

So it isn't just about an automated title report. It's about actually when an order is open, we can tell what needs to be done, how long it's going to take and what the most efficient way to do it is. So we've used technology on the process itself and made little incremental improvements, which add up to fairly significant improvements. So I think there's still a lot of room there. There's a lot of potential interplay with AI for different processes outside of just a production.

We do a lot of things in this industry. We have a lot of interaction and we spend a lot of time on manual functions that we need to look hard at and see if we can't automate. We need to apply technology across all processes, not just automated title. Yeah, definitely. The agency side, a lot of small title agencies that were the struggle is that to delegate and automate people have a hard time with that.

And I see that talking to a lot of industry peers. So what advice do you give to title professionals seeking to integrate automation in their operations while maintaining quality and service? Well, I think you need to be careful, obviously, because AI for all the opportunities it presents also has a tremendous amount of risk if it's not carefully managed and used. I mean, there's some obvious opportunities for automated payments and all kinds of stuff, but that probably just exacerbates the potential problems. So it's got to be done really carefully.

My advice to title agents is make sure you partner with someone you trust and know and that you proceed in a very logical proven process. No title agent out there has to be the innovator or initiate anything. You can capitalize. Most every title agent has multiple underwriter relationships and you can capitalize on the lessons they've learned. So be careful, but be open minded and take a hard look at everything going on around you.

Don't get stuck fighting the control battle. You know, one of the biggest, pardon me if I get off on a tangent here, Mo. No, please do. I'm very passionate about this as well, the delegation. All right.

Well, one of the biggest issues I have seen in my career, one of the biggest impediments for progress I've seen in my career is everybody wants to control everything and people are really reluctant to engage with or use processes or systems that they don't feel like they can control. And that is a real problem because the reality is you don't need to control everything. You need to control the decision whether you want to use it or not, but you can leverage things that other people have developed and take advantage of the risk that they incurred developing them. You don't have to do it yourself, right? So be open minded about it.

Don't get stuck with, I've got to control everything. Make sure that you don't think you really have to control the decisions that are made. Okay. And you can make those, but partner with an established company that has used a product or service or technology and used it successfully. So you can see that it has been implemented, used and it works.

Awesome. I think that the struggle for people to delegate is that they truly believe that nobody else can do it better than them. And I always have this argument, like I can promise you that other people that are better than you, it hits your ego out of the way and it's just somebody better, smarter than you, which it's okay. They do exist. And especially for leaders, if you're an agency owner or leader for a company, you want to surround yourself with people smarter than you and better than you that can really run circles around you.

It's how you delegate and let them do the work themselves because they're better than you. That is very sage advice, Mo. The more smart people you surround yourself with, the more money you're going to make, the better, more success you're going to have. And I can tell you this, honestly, every day I have a realization that is, I know less than I thought I did. You learn all the time if you keep an open mind.

I mean, this is the one thing that I love about you, Pat, is you're very humble. We appreciate you for being the person that you are. Well, I appreciate that. Thank you. I've been blessed and I feel blessed.

But you know what? It's a big, crazy world out there. And I don't know if there's anything that I can't find somebody smarter than I am or more experienced than I am that knows how to do. And I can tell you this honestly, every day I have a realization that is I know less than I thought I did. You learn all the time if you keep an open mind.

I mean, this is the one thing that I love about you, Pat, is you're very humble. We appreciate you for being the person that you are. Well, I appreciate that. Thank you. I've been blessed and I feel blessed and it's just but you know what, it's a big crazy world out there.

And I don't know if there's anything that I can't find somebody smarter than I am or more experienced than I am that knows how to do it better. So I'm always looking. Let's switch gears to pioneering in the industry. WFG has a reputation for being a pioneer in the industry. What groundbreaking initiatives or technologies have you introduced and how have they shaped the company's trajectory?

I think probably the one thing I would call attention to that I'm the proudest of is our tech subsidiary MyHome, which developed the first statusing software. And by statusing, I mean, when we open up a resale transaction, the buyer and the seller, the lender and the realtor all get an email and they can open it up and they can log in and they will be automatically updated 14 times during the transaction. And there's also a part of the process that the buyer and seller could click on each segment as a circle is completed and explains to them what happened and what's going to happen next. Now, when the nerds brought it to me with the idea, you know, they opened up the conversation. They said, have you ever heard of the Domino Pizza app?

And I said, yeah, I have. But why are we talking about pizza? And they said, well, we'd like to do the same thing for the title business. I don't know if I ever told you this, Mo, but I invented copper wire fighting over pennies and I can be really tight. So I've said that I'm figuring this out and I have this epiphany and that is if we can eliminate 14 phone calls or emails on every transaction, this is going to save us a lot of money.

So I got excited about it and we put money into it. We did a beta test on 3,000 closings. We got it very, very well developed and we continue to expand on it and it's been very, very meaningful. But what I missed, what I really didn't understand, and this is one of the life lessons. Yeah, it saves us money, but you know what it does?

People come to a closing with a smile on their face because they haven't been in the dark for 45 days. They got a smile on their face. They know what's happened, why it's happened. The closings take half as long. The realtor and the lender get a referral and we get more business.

It has been a phenomenal source of increasing our resale market share and making this company nicely profitable because we get clients, they stay with us, we make them look good, they get good referrals, they get more business, they get more business, we get more business. Awesome. I truly love what you guys are doing with my home. So how can title professionals cultivate a mindset of innovation pioneering? I'm not trying to rain on your parade or this question.

I don't know if you have to be innovative. What I do think you have to be is aware of everything that's going on, what the trends are, where the industry is moving, where the clients are moving, and make sure that you can stay abreast of it. And then also the backside of that is make sure that you are prepared to take action if things go wrong. One of the biggest problems that people have is that they have not anticipated all the optionality that is out there and how they're going to react to it. Let's face it.

We do not control the market, right? I mean, the market can go south or it can go north. And the competition is who reacts quicker and better to the changing market. So if you've got a plan and an idea about how you can do that, you win. And the same thing goes with innovation.

Stay abreast of everything that's going on. You don't have to invent things, but if they work, adopt them. If they work, leverage them. And don't be afraid to use what your competitors do. I'm sorry.

I'm going to go off on a rant. To this day, I am still amazed at how some companies will not do something because their competitor invented it. I don't care if my competitor invents it. If it works, I'm going to use it. Absolutely.

Let's shift gear here to some personal insights. Do you have a favorite quote that guides your leadership style? There's a lot of quotes out there. I'm going to share with you my favorite quote. I got it from my dad.

He always used to tell me, make sure you like the man you see in the mirror. And his point was, don't do things to impress other people, right? Don't do things based on whether or not they make you look good or bad to other people. Make sure whatever you do, that you feel good about it and that you feel like you're a better person because of it, right? And he was the most consistent person in my life.

He was 100% the same all the time. And I can remember growing up and asking him about things and he says, well, is that the right thing to do? And he made me think about that. But his quote to me was always make sure you like the man you see in the mirror. What a wonderful quote and example to live by.

I'm an avid reader, actually listener. I listen to a lot of Audible books and podcasts. What's a favorite book that you read recently that you want to recommend? Ideally nonfiction. I'm not a fiction person, ideally nonfiction.

Gosh, I read a lot and there's a lot of books that I like. Probably the book that had the biggest impact on me, I read a long time ago. The name of that book is Extraordinary Popular Delusions and the Madness of Crowds. And it was actually written in 1841 by a guy named McKay. And the reason I read it was the first book that actually examined financial bubbles.

And the first financial bubble that it examines was the tulip bubble. I don't know if you ever heard of the tulip bubble. Yeah, of course. Yeah. And the book examines, I think, six or eight financial bubbles.

It's been a while since I read it. But it made me realize a couple of things. The one, and you and I have talked about this, is that people do things based on dreams, wishes and misinformation. And it's a really good reminder to always take a look at what you're doing or why you get excited about something. Peel it apart and make sure you understand what part of your thought process is assumptions and what part of your thought process is fact.

If the bulk of your thought process is assumptions, really, really, really try to verify them. Because you are taking risk, right? And human beings, by our nature, we take risk. We like things. We like to get with the mob when it's running down the street.

You can make some huge mistakes. And right now in a market we're in, we're talking about AI, we're talking about AI, we're talking about AI. Some of it has applications to our business and there are things we can do. But this is not just buy everything and embrace everything out there. Don't do that.

Be really careful and thoughtful about what you do. Make sure you understand what part of your thought process is an assumption and what part of your thought process is based on provable facts. And if the bulk of your thought process is assumptions, really get analytical because the risk factor goes way up. I think it's basically think for yourself. Don't follow the crowd.

I'm not sure who said that. I think Henry Ford said it. It's like one of the hardest things to do is to think, which is what most people don't think. It's easier to follow the crowd than to kind of be original, think for yourself or not. It sure is.

It sure is. Yeah. We're coming to the end here very quickly. It's been going so fast and such a great time to spend it with you, Pat. In closing, what's one key takeaway you'd like to share with title professionals looking to navigate industry challenges with all the cycles and up and down and embrace opportunities for growth?

One of the things that we did starting last year is we actually engaged producing an NPS score, a net promoter score, which is used in most industries, especially among large sophisticated companies to actually judge and rate their customer service. And this is, you know, customer service is the core of our business, isn't it? It's something we talk about all the time. We always say, well, we give great customer service or our service is better than their service. We're the first company in this industry to actually employ an NPS and follow it.

And you know what's happened because of us doing that? It's gone up. It's gone up. We've shared it with our employees. They've gotten very engaged and they've taken ownership and they've gotten very thoughtful about what they can do differently.

And we've improved our NPS score over the last year about five points, which is dramatic and is having a dramatic impact on our new business and the retention of clients. So it goes back to that, instead of an assumption, verify what you can verify. And just going through that process of actually putting a number to it, sharing that with the employees, they've taken ownership of the customer service and consequently the quality of our service has gone up. Awesome. An NPS score is fairly simplistic.

A couple of questions. Would you use us again? Would you recommend to somebody else? Like how hard or easy to implement the NPS score? Because I've heard you talk about it at WFG Executive Summit a few months back.

That's definitely on my things to do. I don't know how many providers there are out there, three, four or five. They're a little bit expensive, but you can check it out and see if there's one you feel comfortable using price-wise. And if it's not an NPS score, find some other outside source that will do surveys for you and give you a rating that you can use and share. And what you really want to do is you want to have a way of scoring your performance.

How is it in the market right now? And then comparing it now versus six months from now. You know, it is amazing thing to me about management is the more information I share with my employees, the better they perform. Duh. I mean, it's kind of stupid, but people have pride.

Yeah, people work to get paid, but they also have pride in what they do and they want to do it better. So if you can help them. right? And what you really want to do is you want to have a way of scoring your performance. How is it in the market right now?

And then comparing it now versus six months from now. You know, it is amazing thing to me about management is the more information I share with my employees, the better they perform. Duh. I mean, it's kind of stupid, but people have pride. Yeah, people work to get paid, but they also have pride in what they do and they wanted to do it better.

So if you can help them score it, judge it and figure out ways to do it better, they will do it better. That's awesome. Well, thank you so much for your time. I can't wait to see you very soon here and hopefully get on a golf course and play some golf together. I would love that, Mo.

Thank you for having me on your show and it's great to be associated with you. Thank you. And that's a wrap on today's journey with Mo Shamil from the Title Agents podcast, reminding you that mastering the art of innovation is key in the title industry's fast-paced world. If you're finding it tough to keep up with the changes and challenges, remember, you're not alone. Our calendar is open for you.

Find the link in the show notes and let's connect. Make sure to hit subscribe to not miss out on strategies that elevate and insights that empower. Together, we'll navigate the future of the industry. I look forward to our next meeting in the upcoming episode. Keep pushing, keep innovating, and see you in the next episode.