Insurance remains a riddle for many farmers despite the perennial threat of drought, wind, or disease slashing their income, with only 13% of grain growers considering multi-peril crop insurance (MPCI), according to a grain-farmer representative organisation.
David McKeon, GrainGrowers chief executive, said surveys of his members revealed that the low MPCI uptake is driven by a limited understanding of the available policies and their perceived high cost.
A Deloitte report found that only 1% of NSW winter-crop producers were covered by MPCI, but about 75% took up named peril insurance, with the high cost cited as the key reason for the low MPCI uptake, The West Australian reported.
MPCI covered a range of perils in a single policy, including those not covered by named peril insurance, including drought, excess rainfall, wind, and wildlife damage.
Deloitte said premiums for MPCI were typically between 5% to 10% of the crop value, compared to just 0.55% to 3.5% for named peril insurance. Pricing for MPCI varied depending on location, level of cover, and the underwriter's understanding of the risk. The financial services firm also said the tendency of farmers with the most risk to seek MPCI more impedes the more widespread use of MPCI. The GrainGrowers' review of MPCI products for cropping operations said the cost was in the range of $10 and $60 a hectare.
The GrainGrowers' review of nine MPCI products showed that the products offered recovery of the cost of production, the topping up of farm income to a proportion of historical returns, payments to match an agreed yield or cover for a particular weather event, the report said.
The report urged farmers to also consider the cost of the time required to compile the farm records and historical data for an MCPI application. Growers should not wait until they finish seeding before applying for crop protection, the report said, as most insurers close their offering before seeding is finished.
McKeon said MPCI is just one risk-management option, and GrainGrowers did not advocate for any particular tool. He also called on the WA government follow Victoria, South Australia, and NSW's lead in scrapping the 10% stamp duty to encourage the uptake of MPCI products.
