Insurance Manufacturers of Australia (IMA), jointly owned by RACV and IAG, will refund $11 million to Victorian policyholders whose premiums increased after removal of the state’s fire services levy (FSL).

More than 200,000 RACV Insurance home building policyholders will receive payments after IMA gave a court-enforceable undertaking to FSL Monitor Allan Fels.

The policies were renewed between June 24 and December 31 last year, while the FSL was abolished on July 1.

Professor Fels says IMA raised its base building premiums by 11% in June following two significant increases earlier in the year, offsetting the impact of the FSL removal. As a result total building premiums rose on average and policyholders did not benefit from the levy reform.

IMA will pay back June’s 11% increase. Acting CEO Alex Harrison says the company has in recent years kept home insurance price rises low, despite major claims costs and significant reinsurance increases.

“We believe we have complied with the legislation and have entered into this undertaking in good faith, acknowledging the monitor’s concerns around the timing of the June… price increase,” he said.