THE Abbott government will assist with developing a multi-peril crop insurance (MPCI) scheme to help farmers manage production risk - but won’t subsidise it like US and European Union governments, says Liberal MP Dan Tehan.
The Agricultural Competitiveness White Paper delivered $29.9 million for farm insurance advice and assessments to help farmers with financial preparedness and risk management around climate variability.
Agriculture Minister Barnaby Joyce said the $29.9m investment was “timely” given the Australian market was expanding for insurance products to help farmers manage risk, like MPCI.
The funding was delivered with a package of measures to assist farmers with drought preparedness including changes to Farm Management Deposits and $250 million in drought concessional loans per year, over 11-years.
Prime Minister Tony Abbott said his government, via the White Paper and other measures, had now put drought policy on a “sound footing”.
“I think that we've got a reliable system for supporting people whose incomes have dried up with the water,” he said.
“I think we've got a better system for supporting people whose businesses are in trouble because of drought.
“I think this is a sustainable drought policy for the long-term.”
Mr Joyce said the White Paper contained provisions to assist with a MPCI scheme through $2500 subsidies to provide a management plan so growers can self-insure against issues like “the vagaries of the climate”.
“We've already put that past some of the State Ministers and we're looking at even some of them matching our contribution, so, this is a real change for the better,” he said.
It’s understood the government’s $2500 grant will assist with funding the $5000 risk assessment offered by fledgling MPCI product provider Latevo and other potential insurers entering the market.
The State’s matching contribution could potentially make up the remaining $2500 or half that amount to cover the audit which involves assessing producers’ five-year production figures, to gauge their eligibility for the scheme.
However, producers would still need to pay the product premium and the federal government has steered clear of committing to underwriting losses for insurance providers.
Mr Tehan welcomed the $2500 grant to help incentivise individual farm businesses to assess their suitability for an MPCI scheme.
“This is a proactive response to future droughts and it allows farmers to take control and plan for future droughts by insuring against that,” he said.
“What we are saying to Australian farmers is, ‘we’d like to get the private sector involved in this market’ so what we’re doing is giving an incentive for farmers to look to see whether this type of insurance would work for them.
“We want them to take the initiative so we’re giving them a little help – and we want the State governments to provide some incentive as well.”
Mr Tehan said the government’s hope was to have the private sector providing a MPCI insurance facility to growers in Australia, rather than the US and EU schemes which are underwritten by governments.
“We’re trying to get the private sector to do the underwriting and we’ll provide the incentive to farmers to look at this product as another tool for them in dealing with the varying climate we have in Australia,” he said.
“In an ideal world - if we can get the scheme up and running for cropping - we can then ask the insurers to look at broadening the product not just for cropping but to other commodities.
“But we need to start by crawling, then by walking, then by jogging and hopefully by running.
“It’s a step-by-step process but we have now given things a kick along, through this White Paper, to see if we can get things started in Australia.
“One of the things that has made Australian agriculture so resilient is the fact our farmers have done it themselves, and have not been reliant on governments like the US and European Union where they’ve become beholden to government and their future isn’t being determined by themselves.
“Their future is being determined by where the government is going on various individual subsidies.”
NSW Farmers president Fiona Simson was chair of an industry taskforce that investigated establishing a MPCI scheme in Australia. The taskforce comprised industry members, banks, CSIRO and Australian Farm Institute executive director Mick Keogh.
The taskforce convened by Grain Producers Australia also made a submission to the White Paper process.
Ms Simson told Fairfax Agricultural Media the $2500 grant was positive recognition from the Australian government that a MPCI needs to be on the table and “is a good thing”.
She said it also provided assurance that the federal government was talking to State governments about how they can potentially support it.
However, she said there was still a way to go in terms of understanding government’s role in supporting the scheme’s implementation and operation.
“We’d hope to continue those conversations to encourage more products into the market,” she said.
“At this point – we think that there’s a bigger role for government than that currently outlined in the White Paper but we need to further develop that with more discussions.
“We need to have a more products and affordable premiums and we need to encourage insurers into the market place.
“That would allow for better competition which will impact premiums and once we have those competing insurers in place, we can then look at a broader product which can cover a cross-section of agricultural commodities, rather than just grains.”
Ms Simson said the taskforce submission put forward several options to government on how they could be involved in a MPCI scheme and support a policy which is “a good starting point for future discussions”.
Mr Joyce said the policy initiatives resulted from the concise work that came from over 1000 contributions to the green paper and white paper process.
He said the final produce “shows that this is a government which takes agriculture seriously”.
“We have to,” he said.
“We have to make sure that agriculture regains its solid footing as a big contributor to the income of our nation as well as alleviate the downturn on other commodity products.”
