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QBE cuts Victoria FSL, with others expected to follow

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Brokers are waiting for more insurers to cut the fire services levy (FSL) on Victorian policies after QBE last week announced it would reduce its rates from January 5.

It follows an initial rate cut by QBE in September. The FSL will be replaced by a levy on all property owners from July 1 next year.

QBE generally leads the way announcing its FSL rate, with other insurers following days later.

The cuts come after insurers made large increases in FSL rates earlier this year. They also follow the Victorian Government’s decision to establish an insurance monitor to ensure policyholders are not overcharged in the transition period.

Insurers are given a total amount to collect for the State Government and because this is the last year of the FSL, they will be unable to make up any under-collection the following year.

LMI MD Allan Manning, a long-standing campaigner against insurance taxes, expects another round of cuts in the final quarter of the FSL.

He has predicted insurers will reduce their collection in the final months of the levy, having built up a “war chest” from the previous steep rises.

Dr Manning told insuranceNEWS.com.au rate increases took effect almost immediately, while the latest cuts have been announced well in advance to force other insurers to follow suit.

QBE has cut its rate on country commercial business to 50% from 70% and on city commercial premiums to 45% from 50%.

Rural householders will be levied 20%, down from 30%, while city householders will pay 15% instead of 20%.

The falls are significant because QBE, followed by other companies, announced in April it would raise its FSL rate to 95% from 85% on rural commercial premiums and to 54% from 44% on metropolitan commercial premiums. The rate for country residential customers rose to 46% from 36% and for city customers to 28% from 18%.

In September it told brokers it would drop the rate to 70% for rural commercial clients and to 50% for metropolitan commercial clients. It cut the levy for rural householders to 30% and for metro householders to 20%.