Victoria’s Fire Services Levy (FSL) Monitor Allan Fels has accepted an enforceable undertaking from CGU after a bitter dispute over the refund of excess sums collected from customers.

Professor Fels’ office was investigating CGU’s 2012/13 overcollection when the insurer raised his ire by “donating” about $1.2 million to the Country Fire Authority (CFA) in lieu of payments to customers.

CGU and 55 other insurers overcollected the levy on premiums in its final year, because they had to estimate the amount they should collect before the FSL switched to the new property-based charge.

In July Professor Fels announced agreements with 55 companies to refund $10.8 million to customers.

He praised the insurers for their co-operation, but named CGU as the “one exception among the 56 companies”.

Deputy Monitor David Cousins held further meetings with CGU to reach an “administrative resolution”. On August 29 the enforceable undertaking was signed by Dr Cousins and CGU CFO Stuart Chapman, ending the stand-off.

The document reveals details of the running dispute.

On February 7, having decided refunding individual policyholders involved too many “administrative and practical difficulties”, CGU told Professor Fels it would instead pay the CFA $1.184 million.

Professor Fels asked CGU to refrain from doing so until industry guidelines had been set for payment of excess levy collections. However, on March 3 CGU announced the donation, which it claimed “completes the insurer’s role” in the matter.

Professor Fels then launched an investigation into “potential contraventions” of the Fire Services Levy Monitor Act’s provisions on price exploitation and misleading and deceptive conduct.

The investigation included notices to produce documents and interviews under oath with four CGU executives.

Dr Cousins told insuranceNEWS.com.au the probe was still under way when CGU offered its undertaking.

The document includes acknowledgements by CGU, including that the amount of excess FSL collected was $1.5 million. CGU denies it contravened the Act, but acknowledges it failed to adhere to “the administrative path set out by the monitor”.

Dr Cousins says an enforceable undertaking is “not something companies would welcome in any sense. We’re pleased the matter has been resolved, but clearly it could have been resolved much earlier.”

The agreement confirms CGU’s payment to the CFA, but places an additional requirement on the insurer to pay $210,000 to the Consumer Action Law Centre, “an organisation identified by the Office of the Monitor as representing the interests of consumers in Victoria”.

It requires CGU to withdraw the media release announcing its payment to the CFA and bans the insurer from publicly referring to the payment as a donation.

However, CGU has won a victory of sorts, with Professor Fels acknowledging it is “uncommercial and infeasible” to return sums that average $8.80 per customer.

“Given that refunds were impractical and the payment to the CFA had already been made, we accepted that the payment made to the CFA should stand,” he said.

CGU has declined to comment on the enforceable undertaking.