Surcharge is inefficient fix
To the Editor:
As manager of Fairmont Farmers Mutual Insurance, I have built a career and a business around looking out for the best interests of our policyholders, most of whom work and reside in southern Minnesota. So when some members of the Minnesota Legislature unfairly target my customers, I feel compelled to speak out.
Minnesota’s police and fire pension funds have a deficit of around $1.8 billion, an amount almost unfathomable for those of us in southern Minnesota. Legislators in St. Paul are considering a proposal that would impose an annual $5 surcharge on all home and auto policies in Minnesota. This surcharge amounts to an unfair bailout of pension plans that is placed squarely on the shoulders of insurance policyholders.
Much of the problem originated from the full-time Minneapolis and St. Paul firefighters. But the proposed surcharge forcibly collects money from the entire state. It’s not fair to ask Greater Minnesota to shoulder a burden that should have been taken care of many years ago by taxpayers in the Twin Cities – especially when Greater Minnesota taxpayers had no say in the problems that got those funds in trouble in the first place.
In short, Greater Minnesota insurance buyers will be forced to pay a surcharge that has little correlation to any services provided to them.
The insurance surcharge is an inefficient way to generate revenue. Processes to collect and track the surcharge will need to be established by the state and by each individual insurance company. Our company will have to spend a great deal of money altering our programs to process the surcharge, educate employees, explain the extra fee to customers, collect the tax and transfer the money to the state. And, the state will have to spend more of its money making sure we do it right.
With such a large outstanding obligation, it seems pretty clear that the surcharge won’t stay at $5 very long. Especially since not everybody will be paying it. Not all Minnesotans drive with auto insurance (about 20 percent break the law and drive without it). Home insurance is not required by the state and some homeowners who own their home don’t buy it. Plus the surcharge only applies to single-family homes. Renters in apartments in the Twin Cities and elsewhere won’t pay. and neither will those who live in townhouses or condos.
Police officers and firefighters deserve pensions, and I understand that something must be done to right the ship. But there are better options to fix these pensions that don’t unfairly punish rural insurance customers.