Victoria’s Fire Services Levy (FSL) Monitor Allan Fels has begun checks on insurers’ premium pricing to ensure it reflects removal of the charge since July 1.

Professor Fels says his office is collecting data from insurers and following up “a large number” of consumer complaints.

Results so far have been mixed and there are concerns some insurers are not passing on the full benefit of the levy’s removal, he told insuranceNEWS.com.au.

He says his office will consider insurers’ claims that higher costs have affected premiums, but companies face stiff penalties if they cannot make a convincing case.

The monitor’s office will operate until December 31 next year, so pricing can be scrutinised long after removal of the FSL, which has been replaced by a property charge via council rates.

Professor Fels’ report for the June quarter says insurers’ decisions to taper FSL collection over the final year of the levy were unfair and probably unnecessary.

It says policies taken out in the first half of last financial year were “front-loaded” and effectively subsidised those renewed later in the period, as insurers raised rates and then reduced them over time to ensure they collected their share but did not over-collect.

Professor Fels says the method reduced uncertainty for insurers but “it was, in retrospect, unfair between policyholders and probably unnecessary”.

He says modelling indicates companies could have raised the funds without increasing FSL rates from the previous year.

“Perhaps the most equitable approach, from a consumer perspective, would have been to reduce the levy on a monthly pro-rata basis throughout the year,” the report says. This would have required a moderate FSL increase at the start of last financial year.

Professor Fels says consumers who paid relatively more should enjoy a similarly large reduction when renewing early this financial year.

The report compares quotes from eight insurers for $300,000 homes in the country and the city, revealing a price differential of up to $827 in Echuca and $327 in inner Melbourne.

Professor Fels says it shows the market is not as competitive as the industry maintains, and consumers can save hundreds of dollars by shopping around.

The monitor’s office also continues to investigate insurers’ communications with policyholders.

The FSL is expected to have collected $550 million last financial year, plus $115 million in GST and stamp duty on the levy component.

Almost half the sum will come from commercial policies.