The end of Victoria’s fire services levy (FSL) should prompt an increase in insurance coverage as premiums fall, but brokers report a mixed response so far from clients.

Insurers began reducing then removing the FSL on premiums earlier this year before its abolition on July 1, when property-owners will pay for fire services via council rates.

Some brokers say clients are using the drop in their insurance bills to top up cover, while others find struggling SME businesses are more worried about low turnover and the economy and are happy to see one cost fall.

Griffiths Goodall Insurance Brokers GM Ben Goodall believes it could take a year for clients to adjust to the new regime.

He says some will not consider increasing cover until they see the impact on their rates.

Mr Goodall is based in Shepparton, a region suffering from food processor SPC Ardmona’s decision to reduce fruit purchases.

Wilkinson Insurance Brokers director Michael Wilkinson says clients are happier to consider increasing cover when they know they are underinsured.

He gives the example of a business that previously said it could not afford cover for a known product liability.

“We have talked about it every year for the past five years and this year they have taken it out,” Mr Wilkinson told insuranceNEWS.com.au.

He says rural clients – who were paying FSL and taxes of $900 on a $1000 premium – baulked at covering exposures such as business interruption, even though they knew they were at risk.

“Now the cost is a lot more reasonable, they are increasing cover.”

Mr Wilkinson says the FSL’s removal gives brokers a chance to talk to clients about exposures, but it is up to them to take the lead.

“It has to come from the broker. It is not going to be client-driven.”

Brian Eaton, an account executive with Geelong-based Roderick Insurance Brokers, says it is too early to judge whether insureds will step up their cover, but he agrees there is an opportunity to open discussions.

He says clients will consider additional cover such as business interruption, although he notes the FSL removal has come amid rate increases following the past few years’ disaster claims.

Mr Goodall has seen insurers raise premiums citing risk re-rating, “although I hold a different view”, and says some rural clients expect large increases in their rates from the property levy.

Farmers with significant improved assets face big rate rises because the levy will apply to their capital improved value. This could be more than their previous insurance bill because it captures assets that are uninsurable, or which the farmers chose not to insure.

However, the FSL’s removal is generally good news for brokers to deliver.

Mr Goodall says clients often express disbelief when they see how much their premium has fallen, while Mr Eaton says customers find the new system much fairer.