A Federal backbencher has given the clearest hint yet, that his government could subsidise farmers to take-up natural disaster insurance.

Liberal Member for the Victorian seat of Wannon, Dan Tehan, chairs the Backbench Agricultural Committee and said the Government had spent more than $3 billion on interest rate subsidies for farmers in drought over the past decade, and it could not afford to keep doing that.

He said it was better to offer farmers support to insure the cost of putting in a crop in the event of frosts, drought, floods or pests.

Only one company, Latevo, offered multi-peril crop insurance last year, but its underwriter Allianz has split to offer its own.

Latevo is in the process of signing another underwriter, but a national tour to meet farmers to promote the insurance package is reportedly struggling to get the message across to growers.

"It very well could require us to give this area a nudge, a help along, to get the market up and running and developed and that's something this government looking at in the Agricultural White paper," Mr Tehan said.

"As we develop multi-peril crop insurance, it works well overseas and there is a role for Government.

"We should use the Agricultural White paper to explore what role we should take here in Australia."

Mr Tehan acknowledged it was a difficult area and that it would be ideal for the market to dictate how it would work, and the type of products available.

He said if the government started subsidising the uptake of insurance, there would need to be a transition away from drought assistance.

"You couldn't just stop drought assistance overnight, so we would have to encourage a move to multi-peril crop insurance, and broaden that into other areas of farming, and ultimately lessen reliance on Government support through the type of drought relief at the moment."

Source - http://www.abc.net.au/