VICTORIANS face double-digit rises in home insurance premiums as the industry seeks to recoup billions from natural disaster payouts including the devastating February bushfires.

Also contributing to the rises has been an increase in the Victorian levy on home and commercial property insurance premiums used to generate the bulk of funding for the state’s fire services, the CFA and MFB.

The fire services levy rose significantly for rural property insurance, but fell slightly in the city.

Victorians who live in suburbs serviced by the CFA, including Eltham, Boronia and Dandenong, pay a higher fire services levy than residents of inner suburbs.

For businesses in country Victoria, the fire services levy on property insurance jumped from 68 per cent to 84 per cent. For country home owners it rose from 26 per cent to 31 per cent.

The increases will soon start trickling through.

The levy is a source of frustration for insurers and for rural businesses and farmers hit hardest by the increase.

Some farmers who face the higher costs are also CFA volunteers.

If policyholders check their bills carefully, they will find a string of additional charges.

On top of the base premium (which includes a terrorism levy) are the fire services levy, the GST and Victorian stamp duty.

The Insurance Council of Australia said the latest increases in the fire services levy highlights the need for a review of the funding model.

”The current fire services funding model in Victoria is not efficient and sustainable because not all Victorians financially contribute to the fire services,” said the ICA’s general manager of policy, Karl Sullivan.

But a spokesperson for Victorian Treasurer John Lenders defended the system, saying this year’s state budget allocated $986 million to ”bushfire-related activities”.

”Just as we have increased our spending on fire services after the recent bushfires, it is appropriate that the insurance industry contributes more too.

”The fire services levy ensures that an oil refinery makes a greater contribution to the state’s fire services than a small office block, based on its risk,” the spokesperson said.

Insurers say the premium increases are helping them recoup reserves depleted by years of large natural catastrophe-related losses. They have also had heavy losses from their investment portfolios.

Insurance losses linked to the Victorian bushfires are estimated to exceed $1.1 billion. The fires cap two tough years for insurers, who have had to pay out on a string of claims from storms and floods, mainly in Queensland and northern NSW.

Indeed, natural disaster payouts since 2007 of nearly $4.3 billion are more than 2½ times the 20-year average for payouts linked to disasters.

Insurance Australia Group, which is behind brands such as RACV and CGU, said average premium rises for motor insurance in the past year had been 6.3 per cent and home insurance rates increased on average by 7.9 per cent.

IAG chief executive officer Mike Wilkins said the insurer was planning ”further rate increases” for personal insurance but rises, before taking into account the fire services levy, were likely to be contained to about 6 per cent this year.

Mr Wilkins told The Age IAG would not ”single out” bushfire victims for price increases.

Suncorp, which operates AAMI and GIO, has flagged premium rate rises of about 10 per cent for home insurance next year.