That's not accurate.
One type of policy form is issued to the lender, one type to the buyer. Both are sold by title agencies on behalf of title insurance companies. Neither are required by the state, but the state does fix the rates in NJ, unlike some other states where rates are competitive. Some lenders own their own title agencies. However, it is the buyer's choice, and a violation of Federal law to require that it be purchased from any specific agency.
Wikipedia has a good overview of this and other issues related to title insurance in the US.
Rhys