Insurers deliver hard truths at FSL hearing

Insurers deliver hard truths at FSL hearing | Insurance Business

Insurers deliver hard truths at FSL hearing

Any reduction in insurance premiums due to the removal of the fire services levy is likely to be offset by other factors, insurers conceded at a public hearing yesterday.

Allianz Australia told the Victorian FSL Monitor Professor Allan Fels it removed the FSL in May, ahead of the statutory 1 July date.

It also conceded that, while the removal of the FSL will reduce premiums by the amount of the levy, this had been offset by other factors that put upward pressure on premiums, such as higher claims costs and reinsurance expenses due to recent catastrophes, and the impact of the low interest environment on insurers’ investment returns.

These points were echoed by other insurance industry representatives of CGU, QBE, Suncorp, and the Insurance Manufacturers of Australia, according to the Insurance Council of Australia.

It stated that other influences on premiums included improvements in the assessment of risk at an individual property level; increases in the costs associated with settling claims such as the cost of materials and labour; and changes to policies such as the introduction of flood cover.

The ICA also noted that many of the complaints received by the Monitor relate to “confusion about the method of FSL collection and the timing of the incoming rates collection methodology, and not the price of insurance premiums”.

However, supporting the decision to replace the insurance-based levy with a property-based one from 1 July, a statement released by the Insurance Council of Australia said the reform meant insured property owners will no longer carry the cost of providing fire services to those who have chosen not to purchase insurance.

“The changes should also reduce the level of underinsurance and non-insurance in the community, which will mean fewer demands on government and community organisations following extreme events such as floods and bushfires,” it added.