Premiums in north Queensland are “largely unconstrained by competitive forces” because there is little or no competition, according to Northern Australia Insurance Premiums Taskforce advisory panel member Margaret Shaw.

Ms Shaw is a long-time campaigner for lower premiums in north Queensland. Her submission in response to the taskforce’s interim report includes anecdotal evidence from residents.

“The economic effect of the premium increases [since 2011] is enormous,” she says. “Premiums are not affordable by anyone’s standards. Even if a property can get a quote for insurance, until the owner can afford to pay it we have market failure.”

She says northern Australia is “in a complete mess with regards to insurance premiums, and something needs to be done – we’ve been saying this for years”.

She notes some insurers may leave the regional insurance market if a government-financed mutual insurer or reinsurance pool is introduced. “It is important we try to keep those companies already in the market and increase the competition.”

Opting for a cyclone reinsurance pool, “with the format to be expanded for other natural disasters”, Ms Shaw calls for the initiative to include education and mitigation measures, “so long as insurance companies take notice of the mitigation”.

“It should only apply to existing properties and would not be applicable to new developments, [which] should take in any new mitigation requirements,” she says. “In this way, the current crisis is not compounded, or complicated, by allowing the market to increase exposure.

“If we didn’t limit our thinking on this, then in the future we could consider expanding the cyclone reinsurance pool into a disaster reinsurance pool, which would result in parity for insurance premiums across Australia and remove our peaks and troughs of claims.

“The profits from the reinsurance pool could be invested in infrastructure mitigation projects, and possibly used for premium loans. This would reduce the pain being experienced by those having to take out premium loans, which can be substantial.”

She also suggests a radical scheme under which a reinsurance pool could be set up by insurers and controlled “by the Insurance Council of Australia or someone else”.

Calculating that insurance companies made a combined net profit “in the region of $2.97 billion” last year, she adds: “If insurance companies, all of them, put 1% of profits per year into a central pool for claims in the case of national or regional disaster, this year alone they would have contributed $29.7 million.

“The amount could be matched by federal/state governments. We do have years without a catastrophe. The pool would slowly build up and be able to cover extreme circumstances without having a major effect on the profits of the companies.

“When it got to a healthy amount, the companies might decide to use some of the money in mitigation, such as choosing to build levees, etc. Towns could apply for grants.”