According to an article published by Grain Central, the 2019 GrainGrowers Multi-Peril Crop Insurance (MPCI) report found that the Australian multi-peril crop insurance and drought insurance market is in disarray with providers exiting the market and a lack of products.
The findings have prompted GrainGrowers to call on political parties to address the market failure that exists in the insurance market.
The grower representative group said MPCI products had the potential to protect Australian farmers against crop yield and revenue losses by enabling farmers to insure against a range of risks including droughts, frosts, pests and prices.
Lack of multi-peril crop insurance product availability
Income protection products are an important tool for Australian grain farmers as they prepare for and manage challenging conditions. The report would typically include a product review, but this couldn’t be included in this year’s report due to lack of product availability – in effect an MPCI product or weather insurance is presently non-existent.
One of the key issues in creating a sustainable MPCI product is participation. Insurance works when you can have a large enough geographic and diversification of risk. If there’s not a big enough premium pool then it can become cost prohibitive for farmers and untenable for insurers.
Lobbying for national insurance scheme
According to Grain Central, the NSW Government has announced it will spearhead a campaign to establish a nation-wide income protection scheme for farmers, beginning with a $2m allocation to kick start the process and calls for the Commonwealth and other states to come to the table and back the national insurance scheme.
“Our primary producers are facing one of the worst droughts in living memory and the NSW Government wants to make sure our farmers have the ability to endure the harsh conditions that Mother Nature can often throw their way,” Mr Barilaro said.
“That’s why we’re putting cash on the table to go to work with the National Farmers Federation and identify potential models that could be used to protect farmers against income loss in future droughts or even natural disasters.
However, according to the Weekly Times, the Federal Government has reiterated it will not subsidise multi-peril crop insurance or other types of income protection for natural disasters.
Risk management for farmers
There are a number of things aside from an insurance safety net that farmers can do to protect themselves.
In some areas there are government grants and subsidies for properties with mulga trees (which provide a backup food source for stock during droughts) and for farmers capping high wastage water bores to help use water more efficiently.
Other farmers are looking at unique ways to diversify and (literally and figuratively) not put all their eggs in one basket. Whether this is looking at different types of crops or stocks or leveraging farm tourism through homestays or Airbnb type accommodation, some farmers are getting creative at spreading their own risk.
Questions about farm insurance or crop insurance?
Western General Insurance has a depth of experience in tailoring insurance and risk management solutions for farmers. Contact us or call us on (03) 5382 0344 to talk about your situation.