Farmers, insurers and researchers in Queensland, Australia have been working together on a new project to offer a more affordable alternative to multi-peril crop insurance, using index insurance to protect against natural disasters like cyclones.
The project has been developed as part of the state government’s Drought and Climate Adaptation Program and aims to address the issue of low insurance take-up among farmers in Australia.
Index insurance will allow farmers to insure against a specific weather event or natural disaster based around the perceived threat at their exact location, and should overcome the affordability issue that has plagued multi-peril crop insurance since its introduction in Australia four years ago.
“Index insurance is … something that’s been done quite well internationally and it’s a different style of insurance,” Jarrod Kath from the University of Southern Queensland said.
“It’s more targeted towards a particular climate risk – say cyclone or drought – and the farmer can set the level of insurance they want and pick the type of risks they want to cover,” Kath continued. “And because it’s more targeted and more focused on particular risks, it’s often quite a bit cheaper than something like multi-peril crop insurance, which covers a whole range of risks.”
“We’re trying to figure out the particular climate or weather indexes that we could focus in on that could be tailored towards individual farmers’ needs,” he added. “And because they’re tailored and targeted, hopefully they’ll be cheaper. And if they’re cheaper then hopefully they’ll be more practical for farmers to purchase.”
“When it comes to crop insurance the offerings are quite restricted,” said Ross Henry from the Queensland Farmers’ Federation, who has led the development of the new index insurance program. “So there is nothing available at the moment to cover the income stream for a farm that’s affected by a cyclone. There are other examples in the world, but in Australia we definitely don’t have that at the moment.”
“There is a want in the marketplace but there’s a lack of understanding because it’s never been there,” he added. “The other side of that is that because the insurance market has never really played in this place in Queensland or in Australia, they don’t really understand what the farmers want, their needs, and how they want it to play out.
“So there’s this gap, and that’s where we’ve been fortunate enough through funding to plug that gap and work in that space. So we can bring those two ends together, and we can see the success in that at the moment with cyclone insurance being developed through this project.”
Source – https://www.reinsurancene.ws