Youi Insurance has backed down and agreed to pay to demolish the cyclone-ravaged home of a North Queensland woman, ending a bitter claim dispute.

Mel Deacon is relieved her insurer has relented, but she's far from satisfied.

"A lot of people say, are you happy?" Ms Deacon said.

"Happiness isn't really an option when the house, in my opinion and that of my builders and engineers, was destroyed by the insurance process and not by the cyclone.

"I've made the decision to demolish it and I'll get rid of the land and not, for a really long time, own a property again."

The conduct of insurers after Tropical Cyclone Debbie is due to be examined by the Royal Commission into financial services in its next hearings later this month.

Treatment by insurers 'worse than the cyclone'

Damaged roof and mouldy ceiling in Mel Deacon's house ( ABC News: Michael Atkin )

Mel Deacon's Proserpine property was hammered by Tropical Cyclone Debbie in early 2017, but she claims her insurers' conduct in the storm's aftermath was far more traumatic than the storm itself.

Youi paid to install a tarpaulin over her damaged roof but she says it left gaping holes, causing far more damage when it rained.

The extent of that damage was disputed by the company, but the Financial Ombudsman Service found in Ms Deacon's favour and deemed Youi liable for the damage.

Despite that finding, Youi paid Ms Deacon just $161,000, well below the $270,000 she was insured for and her quotes to fix the damage, and closed her case against her will.

In June, 15 months after Cyclone Debbie, 7.30 visited Ms Deacon's home and saw it was riddled with mould, had widespread water damage and had gaps where the roof should have been.

Following the story's broadcast two senior Youi representatives agreed to meet with Ms Deacon and her federal member of parliament, the LNP's George Christensen, at her house to try to finally resolve the dispute.

Mr Christensen said it was clear that the property was "absolutely stuffed" and a complete write-off.

"The good thing is the very senior representatives of Youi who came to look at it also recognised pretty quickly that was the situation," he said.

"It's obviously sad that anyone has to go through that sort of trauma after a natural disaster to try and get a fix to what should be a simple service that they're paying for."

Ms Deacon believes her insurer only backed down after she appeared on the ABC.

She increased the pressure when she made a submission to the Royal Commission and lodged a follow-up dispute with the Financial Ombudsman.

"It was probably becoming quite obvious that I would have won and I think that by folding they avoided having another decision passed by the ombudsman," she said.

"They have offered to pay out the full amount insured ($270,000) and pay the full cost of demolition."

In a statement Youi Insurance said, "We recognise (Ms Deacon's claim) took an unacceptably long time to resolve, and we apologise for this".

"We are pleased that Ms Deacon has now been settled in full and will begin to get her repairs underway."

Youi 'became unnecessarily adversarial'

Mel Deacon says insurance companies are exploiting gaps to avoid paying out on claims. ( Source: Youi advertisement )

Ms Deacon wants the royal commission to look at making lasting changes to simplify the claims process and improve dispute resolution for consumers.

"A lot of my motivation in fighting it was so many people didn't have the time, the energy, the will, or knowledge and I'm sure there must have been so many people who have ended up in a really poor position," she said.

"I think the insurers have these gaps that they can go through as big business and they take them.

"I think the only way to actually stop that from happening is to close those holes.

"(Youi Insurance) just took every single opportunity that they could just to win, so it became really unnecessarily adversarial."