The Victorian Government is proposing fines of up to $500,000 for individuals and $10 million for companies that take advantage of consumers during the transition from the fire services levy (FSL) to a property-based tax next year.

The state’s incoming FSL Monitor, former Australian Competition and Consumer Commission (ACCC) chairman Allan Fels, will be able to apply to the Supreme Court for orders, publish guidelines, investigate and prosecute rule breaches, and name and shame over price exploitation.

Legislation introduced to Parliament last week states an insurer is engaging in price exploitation “if it issues a regulated contract of insurance and the price for the insurance is unreasonably high, having regard to a number of factors including the fire services levy reform, the historical fire services levy rates charged by the insurance company and the costs of supplying insurance against fire”.

Consumer Affairs Minister Michael O’Brien introduced the new legislation while announcing Monash University academic David Cousins as Deputy Monitor.

“This law will, for the first time, place legal obligations on insurers regarding how the fire services levy can be passed on to consumers,” Mr O’Brien said.

Dr Cousins is an Adjunct Professor with the Centre for Regulatory Studies at the university’s Faculty of Law. He has served as Victoria’s director of consumer affairs and as an ACCC commissioner.

The FSL will be abolished next July 1 and the monitor’s office will end on December 31 2014, when a sunset clause repeals the new laws.

The Insurance Council of Australia has set up a working party to review the legislation.

The monitor will provide information, advice and guidance on FSL reform, scrutinise insurance premiums and ensure the industry is not exploiting consumers on price.

He will have the power to refer complaints to the Australian Securities and Investments Commission, Australian Prudential Regulation Authority and Financial Ombudsman Service.

Professor Fels will be able to order people to provide information and to apply to the courts for search warrants.

The courts will have power to award compensation for consumers and to order corrective advertising.

The legislation says the monitor may prepare a draft code of practice on insurance contracts.