The Victorian Government last week officially abolished the fire services levy (FSL) on insurance and appointed a monitor to ensure the industry passes on the savings.

Former Australian Competition and Consumer Commission chairman Allan Fels will serve as Fire Services Levy Monitor for two years “to ensure insurers genuinely pass on savings to their customers” when the FSL is removed, according to State Treasurer Kim Wells.

Legislation to replace the FSL with a property-based charge was introduced to Parliament last week. The Government says insurance costs should fall when the FSL ends next July, saving households and businesses about $100 million a year.

“Legislation will be introduced in coming weeks to establish the monitor as an independent statutory appointment with the resources and powers to protect consumers,” Mr Wells said.

“New, stronger consumer protection laws will be passed during the transition to protect consumers against price exploitation and misleading and deceptive conduct.”

Professor Fels will have the power to refer complaints to bodies such as the Financial Ombudsman Service.

Mr Wells says households will pay about $60 million less under the new levy, which will be collected by local councils. Businesses will save about $45 million.

The Victorian Government budgeted to collect $641.9 million in FSL in the financial year to June 30 and $580.5 million this financial year.

Insurers raised premiums to cover the last year of the levy, but QBE has since reduced the charge.

Industry sources have told insuranceNEWS.com.au most insurers are still considering whether to reduce the levy in stages this year. Various sources have rejected reports insurers may drop the levy entirely in the final quarter.

Insurance taxes campaigner Allan Manning says it is difficult to see how insurers can do this, given the $580 million they have to collect for the fire services.

From July 1 next year, the two-tiered property levy will comprise a fixed component of $100 for residential properties and $200 for commercial, industrial, farming and vacant properties – plus a variable component calculated on the capital-improved value of the property.

Mr Wells will form an expert panel to work on implementing the change in Victoria. He says it will consult with businesses, local government and other community stakeholders.

Insurance Council of Australia CEO Rob Whelan says the industry welcomes the change, which removes a key disincentive for property owners to insure adequately.