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I hate being "let me explain how to fix this industry which I know nothing about" but this is themotte so here goes.
Why, instead of doing all that work, doesn't a title insurer simply collect the payment and not do any work? If the current claims payout is 5%, maybe now it goes to 10%. Complicated mineral claims? Pschaw. I'll only do title insurance for houses and apartments.
I wouldn't rule out that a lot of insurers are stupid and lazy and this is their basic process anyway.
Presumably you don't built the registry from scratch. Just every time someone "runs title" it goes into the database and the next time someone runs title it just pulls the record for a flat fee of $50 or something. That said, I do acknowledge that the government fucks everything up so it probably would be some horrible boondoggle.
I have a feeling this is how the UK does it; the ancient system still applies (unlike those continental countries like Germany where every piece of land is registered), but each new purchase is registered, so slowly the records are built up. Just googled and apparently 83% of British land is now registered with the Land Registry.
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Because doing the legwork means the insurance is significantly cheaper than other forms of insurance in proportion to the total benefit. If I get the 15/30 minimum liability coverage in PA, it's probably going to cost about $800/year. $800 for a max payout of $30,000 means I'm paying 2.6% for one year of protection. On the other hand, the cost of title insurance on a $300,000 house is going to run about $1,500, so I'm paying 0.5% for protection as long as I own the home. If policyholders were paying $7,500 annually for title insurance, it might make sense to forgo the examination, because you'd then be able to absorb huge losses.
There's also the moral hazard issue where people don't attempt any funny stuff when they know they aren't going to get away with it, because there will always be a title search. Say I own a house that I'm offering for sale for $300,000, but I still have a mortgage that I owe $200,000 on. I list the property with a real estate agent, and Bob agrees to buy the home for the listed sale price. Bob's lender asks you to write a policy for their loan amount, and Bob purchases his share, and you write a policy for the full $300,000. At closing, the bank cuts me a check for the full purchase price, and I deposit it in my bank. After that, I stop paying on my existing mortgage, the bank forecloses and kicks Bob out of the house, and both Bob and the bank file claims for the full $300,000.
This lien isn't the kind of thing that's normally even a problem for title insurers; we'd just note it in the report so the closing attorney knows that the mortgage has to be satisfied to resolve it. But it's a serious risk if you don't even know about it.
Title insurance is mostly for homes and apartments, though commercial properties are insured as well. I did mineral work mostly and I've never heard of anyone insuring a mineral interest.
The issue with doing that is that the company running the title isn't trying to uncover or resolve every possible claim against the property, only the ones that are likely to become problematic from a business perspective. It's essentially a cost-benefit analysis. If the government is guaranteeing title, however, it has to be ironclad. Due process requires notice and opportunity to be heard, which means that a more extensive search needs to be done, and all interest-holders have to be notified and able to present their case. I talk about this more in the post below, but what this means is that a complicated quiet title action needs to be performed so a court can make a determination of who owns what. Several states had this process for a while, but it proved too cumbersome to become popular. The countries that have it now started it when most of the land was unseated, and the system could be developed from scratch.
I'll add that 'full value of home and land' isn't the cap for a title insurance payout; depending on the contract, certain types of breach (most notoriously unpermitted work, but also certain liens that attach to properties) can exceed the value of some homes or business locations.
They can, but the policy has coverage limits that are usually what you pay for the property.
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