Rates for home and contents cover in north Queensland have risen 80% since 2005 due to insurers responding to cyclone losses, according to the third Australian Government Actuary (AGA) report on insurance pricing in the region.

The report, released on Friday, shows prices across the country have risen 25% on average over the same period.

Actuary Peter Martin also attributes higher premiums to developments in catastrophe modelling and rises in the cost of reinsurance.

But he adds that competitive pressure “is largely missing in north Queensland”, and insurers operating there are not particularly anxious to protect or grow market shares.

This has allowed them to price largely unconstrained by competitive forces.

Competition is a secondary issue to poor claims experience but has played a part in rate increases.

The AGA says storms cause the worst losses for insurers in dollar terms, but the costs are spread across a large number of policyholders in many regions, unlike cyclones, which mostly occur in northern Australia.

“As a result, unlike cyclone risk, storm risk does not lead to large regional variations in premium rates.”

Insurance Council of Australia CEO Rob Whelan says the report shows insurers have lost money in the region for many years because of cyclone losses, but despite this they have remained in the market and helped rebuild communities after some the largest natural disasters of recent years.

He says competition will not increase unless work is carried out to reduce risk.

Allianz Australia says the Government continues to misdiagnose the cause of high home insurance premiums in north Queensland, and continues to propose policy responses that will have no impact on the problem.

It disputes the AGA’s view that insurers do not want to protect or grow market share.

“This is a somewhat odd observation given the report aptly demonstrates that home insurance in north Queensland has been unprofitable in the past and the jury is still out on whether, even after recent premium increases, it has reached sustainable levels of profitability,” a spokesman said.

“The report seems to wonder why insurers are not falling over each other to grow their share of an unprofitable insurance market.

“It is such commercially naive comments about competition that appear to have reinforced the Government’s erroneous view that competition-related matters, such as the proposed north Queensland home premium comparison website and encouraging the use of foreign insurers, will do anything to address the real underlying factors that are driving high premiums.”

The AGA has produced two previous reports on strata pricing in north Queensland. The third report addresses home and contents cover and compares pricing with the rest of the country.

It finds Brisbane premiums were about 60% of north Queensland rates in 2012/13, while Sydney and Melbourne homeowners, who have no cyclone risk, paid 40% of the cost of north Queenslanders.

While natural peril risks in north Queensland and the three cities are about the same, giving them each about $40 million of claims costs unrelated to cyclone, north Queensland has an extra $50 million-plus of cyclone claims risk.

Brisbane has about $10 million of cyclone risk.

“Cyclone risk can have a substantial regional impact on premiums,” the AGA says.

The report – which uses data from Allianz, IAG, QBE, RACQ Insurance and Suncorp from 2005-13, plus Insurance Statistics Australia – notes a “quite significant variation” between premiums within a fairly small region due to developments in pricing.

Insurers paid $1.40 in claims for every $1 of premium collected from the region over the period.

They were profitable in 2011/12 and 2012/13, relatively benign weather years.

The AGA compared cyclone losses with riverine flood risk and found people with flood risk can pay very high premiums and more than the maximum cost of cyclone cover for any property in north Queensland.

The maximum north Queensland flood risk is estimated to cost 2.5 times as much as the maximum cyclone risk, but the flood risk is spread across a wider group of policyholders, bringing down the cost to about 10% of the cost of cyclone.

Finance Minister Mathias Cormann says initiatives to tackle the high cost of insurance in north Queensland include establishing a comparison website, encouraging unauthorised foreign insurers (UFIs) and having engineering assessments for strata properties to promote resilience.