Victorian Fire Services Levy (FSL) Monitor Allan Fels has asked Allianz, CGU, RACV, QBE and Suncorp to attend a public hearing to discuss removal of the charge from insurance premiums.

He says the insurers will be asked to explain their pricing practices, following concerns about premium increases offsetting the levy’s removal.

The five insurers provide nearly two-thirds of the state’s property cover, but smaller insurers are also encouraged to make submissions to the hearing in Melbourne on June 18 and 19.

The monitor cannot compel insurers to attend, and the companies may be concerned that they will be expected to reveal sensitive commercial information about strategies and pricing.

Insurers are already providing co-operation and transparency to the monitor, and it is up to them whether they front the meeting, the Insurance Council of Australia (ICA) told insuranceNEWS.com.au.

Suncorp plans to attend. It welcomes “the opportunity to demonstrate we are providing the highest level of transparency to our customers and the monitor”, a spokesman said.

Allianz says it has co-operated with the monitor and has not been contacted about any complaints of the type mentioned by Professor Fels.

“Having regard to that, we do not think it appropriate that the monitor mention Allianz in the media in any context that might imply that it is not acting appropriately in relation to the removal of the FSL,” a spokesman said.

“Allianz believes that communication directly with the monitor and/or our customers on these issues is likely to be the most constructive means for achieving a smooth transition to the property-based levy, in accordance with the terms of the reform legislation.”

CGU says it has a constructive relationship with the monitor’s office, has provided detailed information on FSL compliance and has engaged directly with the office on the six complaints it has received.

Given this, “we were surprised by the monitor’s decision to hold a public hearing into insurers’ pricing practices”, a spokesman said.

“CGU has an ongoing dialogue with the monitor’s office and we welcome the opportunity to address any concerns directly.”

In his first report to the Minister for Consumer Affairs, Professor Fels says his office is examining how insurers charge the levy this fiscal year.

He notes insurers are liable to the Government for the full 12 months of contribution from a fire insurance premium, regardless of how late in the financial year the premium is paid.

Professor Fels has written to eight insurers requesting explanations for large increases in FSL rates, and will require monthly data from providers so he can track changes in the levy and premiums.

He says most insurers “front-loaded” FSL collection early in they year so they could lower prices later while still collecting their full liability.

Because the fire services’ funding requirement fell this year “it is unlikely that any individual insurer would have been required to collect significantly more FSL in 2012/13 than in the year before”, the report says.

“Taking into account the regular annual growth in premium base, even holding their FSL rates consistent with the previous financial year would have resulted in the total collection exceeding the liability to pay the fire services.”

Companies seemed to believe that if FSL rates were consistent across the year, policyholders renewing towards the end would choose to go uninsured to avoid paying the levy.

Although some companies ruled out FSL refunds if an insured cancelled a policy, there have been cases when this was overturned after a policyholder complained, the report says.