A NSW regulator has released a final report detailing changes to key recommendations for the fledgling multi-peril crop insurance industry.
The multi-peril crop insurance review report was conducted by the Independent Pricing and Regulatory Tribunal (IPART), an independent NSW regulator that reviews essential services, and conducts specials reviews upon government request.
Among the key changes made in the final IPART report is a statement about an upfront MPCI premium subsidy being “more effective in achieving” the uptake of multi-peril policies, than a stamp duty waiver, The Weekly Times reported. A recommendation has also been included in the report that government expenditure should rise if it provides a subsidy to MPCI because “the subsidy would more than offset any savings in drought assistance.”
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However, the NSW Government has announced its decision to scrap stamp duties on crop and livestock insurance from January 01 next year, a move worth $12 million over four years, the publication reported.
Stamp duties had been ranked fourth of the five options designed to lift multi-peril insurance uptake, the report showed.
According to the final report: “the reduction in costs from waiving the stamp duty would be too small to materially change uptake rates of multi-peril crop insurance” and “we are not therefore recommending that the stamp duty be waived.”
The final IPART report also seems to reduce the emphasis on the recommendation about the NSW Government providing an upfront premium subsidy for MPCI, which it estimated would cost about $7-$8 million, but would increase uptake,
The Weekly Times said. The final report still proposed that the Government go ahead with the premium subsidy, albeit temporarily.
IPART also argued in the report that it is unlikely that these subsidies will provide the Government savings from reduced drought assistance payments because, since 2002, only 15% of the Government-provided farm assistance went to cropping farmers.
The Weekly Times said it’s understood that the NSW Government has backed out of its plan to provide an upfront premium subsidy.
Dan Cooper of the NSW Farmers grains committee said the group was disappointed with the Government decision on the upfront subsidy, and that they would debate the topic at this week’s NSW Farmers conference.
“We need to have more discussions with the Government about where they think we can best invest the money to (increase its) uptake and get a viable multi-peril industry going,” he told
The Weekly Times.
However, he was still keen to pursue the idea of providing MPCI underwriters with financial assistance, via forgone stamp duties on insurance, to help reduce administration costs associated with loss assessment and provide them with a “stop loss” guarantee, the report said.
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