One in eight Queensland small businesses are underinsured because of high premiums, and more than half say soaring insurance costs have cut their profitability.

About 5% have dropped insurance altogether, according to the Chamber of Commerce and Industry Queensland, which surveyed 1588 of its members in April.

GM Advocacy Nick Behrens says rising premiums have become a major issue for business across the state.

He told insuranceNEWS.com.au that Far North Queensland, north Queensland, the Wide Bay-Burnett area and southwest Queensland have seen the largest increases, but business owners believe there is cross-subsidisation to cover losses in some regions.

Owners say they are being priced on postcode when they are a low risk, and insurers are not taking mitigation work into account.

Many have had to absorb the increases because their market is too competitive for them to pass on the costs to consumers.

Increases of more than 2500% have been reported and the average rise in the most recent premium was 58%.

About 40% of owners have switched insurers and 32% report “a very poor to average experience” when making a claim.

The report calls for standard definitions and terms for all policies, more work on flood and cyclone mitigation, reduction or removal of insurance stamp duty and allowing foreign insurers to enter the market.

Mr Behrens says business owners in north Queensland complain about a lack of insurer competition.

“The one thing that is clear from this report is that Queensland small businesses cannot continue to sustain the premium rises that have occurred across the past two years.”

Suncorp says mitigation work must continue in the state to help lower premiums.

“Mitigation infrastructure, such as flood levees, can have a positive impact on insurance premiums for customers,” a spokesman told insuranceNEWS.com.au.