Multi-peril crop insurance companies (MPCI) are looking forward to governments offering subsidies for premiums, despite having a better year with fewer payouts.

The fledgling industry has only a handful of companies and competition is fierce because of the small number of farmers interested. Latevo, the first to offer such insurance products, said fewer than 1 per cent of Australian farmers were taking up MPCI, making it difficult to spread the risk. But the company's founder, Andrew Trotter, said a better year with fewer crop failures has meant that for the first time, it collected more in premiums than it paid out. Like its competitor Sure Season, Latevo paid out flood-hit farmers in the central-west of NSW, where heavy rain inundated crops around Forbes in September 2016. "We've got a couple of clients south of Forbes that got really badly hit this past year, and we're processing their claims now," Mr Trotter said.

"They were the fortunate ones compared to their neighbours, who had decided to take the risk on themselves and got flooded when the Lachlan River flooded."

New kid on the block Sure Season, which only began offering coverage for revenue loss in 2016, has also paid out to farmers in southern Queensland, the central-west and northern areas of NSW and in Western Australia following frost. Sure Season said it had a long-term arrangement with underwriter Lloyds of London for its MPCI revenue insurance where farmers could retain some risk — for example, the first 30 per cent of their income — and any loss above that revenue they could claim and reduce their premium. Meanwhile, Mr Trotter said Latevo was keen to defend its products from copycats. "Make no bones about it, Latevo will protect its intellectual property and if people copy what we do, we'll deal with it accordingly," he said.

Government subsidies being considered

Currently the Federal Government offers about $2,500 rebate on the financial check required to take up multi-peril crop insurance. But the NSW Government is considering recommendations from an independent pricing and regulatory commission IPART report to subsidise premiums on multi-peril — 50 per cent for the first 2 years capped at $30,000 per farm, falling to 25 per cent for three years. "Every new business has a gestational period to get up and going and we really do need some greater participation by the farmers or the product won't be here in 5 years time," Mr Trotter said.

"The reality is governments are looking at this very closely because they understand we need to get more participation by farmers.

"It's a cultural shift as farmers have never thought of it before." Sure Season's Brendan Reinheimer said that while MPCI has a little way to go to be commercial and on its own two feet, the MPCI "revenue products" did not need any subsidies by State and Federal Governments as they did in other parts of the world. Mr Trotter said his clients were using the insurance to help them take up forward grain contracts. "Effectively, people bought insurance contracts in March [and] April last year; they saw some price spikes for both wheat and pulse prices," he said. "So they forward-contracted on those prices for delivery in [the] December-January period. "They've been able to get far greater return for this year's crop than farmers that didn't have that confidence to forward-sell when they didn't know what sort of crop they were going to get." Source - http://www.abc.net.au