The Federal Government will examine insurance affordability and availability for a white paper on its policy to develop northern Australia.

North Queensland-based MP Warren Entsch, who will chair the committee preparing the paper, says the insurance crisis must be addressed because cover is vital to encourage development.

Insurance has become unobtainable or unaffordable in many regions, he told insuranceNEWS.com.au.

And he says the Insurance Council of Australia (ICA) has “had its head in the sand for a long time, pretending there is not an issue”.

Mr Entsch claims insurers are not interested in the north because only 4% of the population lives there, while underwriting decisions are based on postcode rather than actual risk.

Some business owners cannot obtain cover, while homeowners have paid up to eight-fold premium increases to satisfy bank mortgage requirements.

The MP says unit prices have halved in parts of Cairns after the cost of strata insurance soared.

Strata premiums have begun to fall this year, but are still well above 2010 levels.

Mr Entsch rejects last year’s report by the Australian Government Actuary, which found strata premiums were underpriced for years and have tripled since 2007 as insurers responded to losses.

But ICA says new insurers have entered the region’s strata market. It says the insurance bill from catastrophes in Queensland this year is nearing $1 billion and, since 2011, claims from the state have cost insurers $6.7 billion.

ICA says insurers price to risk, and reinsurance costs have risen because Queensland risk has been reassessed over the past couple of years.

The Government wants to develop food production, tourism and energy exports to exploit the north’s proximity to Asia. It also hopes to increase the population north of a line from Exmouth in WA to Rockhampton in Queensland.