A major broker has denied the need for government subsidies in developing crop insurance products suited to Australian conditions.
Julian Robert, director of agribusiness with Willis Towers Watson, said that despite the availability of crop insurance in Australia for decades, uptake remains low, with only less than 1% of Australian growers that had crop insurance, and something had to change.
"Something that is sustainable and affordable is critical to this; if farmers can't afford it, they are not going to take it up," Robert told
ABC News, as he claimed that government subsidies are not the solution to the issue.
To develop insurance products suited to Australian conditions, the Queensland Farmers' Federation (QFF) was working with the University of Southern Queensland and Willis Towers Watson, with funding from the State Government, said Ross Henry, QFF project officer.
"Queensland has a pretty volatile climate and weather and we are looking at providing an extra level of risk management and insurance options are what we are going for," Henry told the news agency.
Robert said there is a need to develop new structures to “deal with the key risks of drought and other rainfall-related issues, either in an index format or a multi-peril format.”
Speaking about the merit of index-based insurance, Robert said that it's both simple and could be customised to meet the farmer's price point: "The way that it works avoids the complexity of other types of insurance. The index itself, which could be a measure of rainfall, is the measurement required to settle the contract.”
With many farmers wanting policies that run for three to five years, Robert said that the insurance industry should have a change in mindset.
"It is possible to have three to five-year policies; it's possibly even a failing of the insurance industry because typically, they run to annual policies and that is the mindset," Robert told
ABC News. "So, it would be an advance that would benefit farmers."
Henry said that crops that were not annual, as in horticulture, require policies that ran for more than a year.
Henry also said there needs to be an education process for both insurers and farmers “about the benefits of insurance within their business."
"Both for the insurance companies — about new commodities and the new way that farmers want it — and for farmers.
"If we can get that conversation going and not get bogged down in unnecessary detail, I think we can get there," he told
ABC News.
On the issue of government subsidies, Robert claimed that unlike in the US, where crop insurance programs were heavily supported the government, it was not necessary nor desirable in Australia, the report said.
"We are not calling for subsidies here, because that has been a point of discussion for years and has not moved forward," he said. "Our program is to leverage insurance without a subsidy.
"It seems to be a matter of policy: if you start subsidising one sector of industry as opposed to another then inequities can come in.
"Having said that, any subsidies that were available would be fantastic," he said.
Henry said the research had identified affordable index-based insurance products for sugarcane and cotton industries.
For cane, there was “one being cyclone cover and the other for excess rain at harvest time;” and for cotton, there were “ two drought products — one at planting, another through the season — and also a a product for a wet harvest which causes a fungal infection within the cotton boll, affecting the whiteness and brightness,"
ABC News reported.
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