THE CHIEF executive of a farm income protection business said the pay-outs made by insurance businesses to growers highlighted how multi-peril farm insurance could strengthen Aussie farmers’ resilience to climate risk.
Andrew Trotter, Latevo, said his company had paid out over $6.5 million in claims to a number of growers before New Year.
“It shows how you can strategically use insurance to underpin your business so you have something to fall back on in the event of a year like this one, which was a terrible drought for many down the east coast,” Mr Trotter said.
Mr Trotter’s business is not the only one to pay out claims in recent weeks.
New player in the insurance sector Farmers First announced last week that successful multi peril insurance claims taken out to cover the risks of production last year were being processed.
Farmers First director Rodney Hamilton said most clients had completed their claims process and have received settlements up to the level of cover insured and will now be in a position to finance the 2019 cropping program.
Mr Trotter said farm protection insurance had to play a critical role in Australian agriculture into the future given our variable and semi-arid climate.
“For me, farm protection products of the various types are the only way agriculture can move forward in this country,” he said.
He said prices, often cited by the production sector as a reason they did not take out income protection of some sort, were reasonable.
“They can get it for the price of a summer spray, so I don’t buy the claims it is too expensive.”
Mr Hamilton agreed.
“The reality is that it is a no brainer to take out the cover; its cost effective and really works; it allows a farmer to lock in profit with confidence and farm to maximise output, which further enhances profit; and it's the reason much of the world’s farmers are using various similar products to minimise downside risk” he said.
He said some form of farm income protection bought primary producers great peace of mind.
“It’s about removing the risk of an unpredicted seasonal wild card chocking the farm business, as well as conserving profits and preventing that dreaded trip to the financier to borrow more money.”
Mr Trotter said, contrary to many opinions, he did not feel largescale government intervention was necessary to getting liquidity into the farm income protection sector.
“To make the job work I’d just like to see government nudge policies to change the behaviour, to get the whole cultural approach to risk to adjust.”
He pointed to news GrainCorp may be planning to use an insurance system to protect against catastrophic events, such as this year where deliveries into its network are to date just 14 per cent of the 2016-17 season, showed big business was looking at managing climate risk through insurance.
“To mitigate climate change and variability insurance is the way forward, and this applies to farmers as well as agribusiness.”
Mr Hamilton said he thought more and more growers would take out income cover.
“While the multi peril insurance industry is in its infancy and, as more farmers take the cover, the premiums will reduce as volume kicks in, and the financial risk to underwriters is minimised.”