When the levy breaks

It has been a long time coming but from 1 July the much-maligned Victorian fire services levy will be no more.

With many premiums set to fall thousands of dollars in cost, the change offers Victorian brokers a prime opportunity to help underinsured clients and attract new business.

NIBA CEO Dallas Booth says: “This has been a long-standing campaign for NIBA – and many other organisations.”

“There have been aspects of the phase-out that have been difficult and challenging for brokers but the final outcome is a fantastic win for the insurance industry and, more importantly, for policyholders.”

“The cost of insurance in Victoria is reducing dramatically and this gives brokers the tremendous opportunity to have fresh conversations with their clients about their risks and their insurance cover.”

Welcome change

In August 2012, the Victorian Government announced the decision to replace the insurance-based model with a levy paid by property owners and collected by local councils.

Professor Allan Fels, who was appointed the state’s Fire Services Levy Monitor, says insurers will be under close scrutiny to ensure their new premiums reflected the absence of the levy.

“I want to know exactly how insurers are communicating with their policy holders about the changing levy arrangements,” he says.

“It is important that anyone who has an insurance policy understands how the levy is changing and exactly what it means for them.”

What brokers need to do is tell their clients: ‘The fire services levy is gone. Can we check your sums insured?

NSW and Tasmania are the only states currently maintaining some form of insurance-based fire services levy, although the NSW Government canvassed the option of a property-based levy in a recent discussion paper.

Time to shine

Alan Wilson, Director of Alan Wilson Insurance Brokers and 2012 NIBA Broker of the Year, says the abolition represents a golden opportunity for the industry.

“This is a chance here for the insurance industry in Victoria to shine because they can actually deliver some good news,” he says.

“They can come back to their clients and say we’ve been campaigning for this for a long time.”

Wilson says many clients have become accustomed to the higher rates prompted by the FSL and are not up to speed on the changes coming in July.

“I think there’s going to be a lot of customers in country Victoria who are going to be very pleasantly surprised because the fire services levy was such a large part of their insurance,” he says.

The next few months are the perfect time to address the underinsurance of many clients, Wilson says.

“The levy was up to 95% for some people.”

“We had clients deliberately cutting back on the sums insured.”

He said one of his clients, a multi-level chicken farm, was paying $100,000 on the fire services levy alone.

“That’ll be a very pleasant renewal meeting. We’ll be able to go in with big smiles on our faces.”

“What brokers need to do is tell their clients: ‘The fire services levy is gone. Can we check your sums insured?’”

“That’s just starting to happen now and we’ve already had a few who have said, ‘Okay, lets have a bit of a review of our cover.’”

Brokers are also looking forward to more certainty in premium pricing, after some insurers stopped charging the levy for new clients from as early as February.

Interrisk managing principal John Mutton says the mix of variable premiums and variable tax components had complicated decisions for brokers and clients.

“We can’t wait for 1 July,” he says.