Australia - Crop insurance viable without government subsidies says international broker

10.07.2017 89 views
An international insurance broker says government subsidies are not needed to develop crop insurance products suited to Australian conditions. Director of agribusiness with UK insurance broker Willis Towers Watson (WTW), Julian Robert, said crop insurance had been available for decades in Australia but the uptake was low 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," he said. Queensland Farmers' Federation (QFF) project officer Ross Henry said with funding from the State Government, the QFF was working with the University of Southern Queensland and Willis Towers Watson to develop insurance products suited to Australian conditions. Mr Robert said less than 1 per cent of Australian farmers had crop insurance compared to 90 per cent in the US and new structures had to be developed because there were always risks associated with farming. "What's needed is new structures that deal with the key risks of drought and other rainfall-related issues, either in an index format or a multi-peril format," he said.

Index-based insurance has merit

Mr Robert said index-based insurance was 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," he said. "The index itself, which could be a measure of rainfall, is the measurement required to settle the contract."
Many farmers said they wanted policies that ran for three to five years so they could go with confidence to their banks but Mr Robert said this would require a change of mindset in the insurance industry. "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," Mr Robert said. "So, it would be an advance that would benefit farmers." Mr Henry said policies that ran beyond a year were necessary for crops that were not annual, as in horticulture. "I think there is an education process that needs to happen at both ends... about the benefits of insurance within their business," he said. "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."

Government subsidies not necessary

On the vexing question of government subsidies, Mr Robert said while American crop insurance programs were heavily supported by the US government, that was not necessary or desirable in Australia. "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." Mr Henry said the research had identified index-based insurance products for sugarcane and cotton industries. "[We have identified] two products for cane, one being cyclone cover and the other for excess rain at harvest time," he said. "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." Mr Henry said the products would be index-based and affordable according to the farmer's needs. Source - http://www.abc.net.au
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