In light of the decline in sales of multi-peril crop insurance (MPCI) in WA this season, insurance brokers are warning WA growers that the “opt-in, opt-out” behaviour could lead to higher premium costs during leaner years, it has been reported.
Ray Ball, Country Wide Insurance Brokers managing director, told Farm Weekly
they had not sold any policies for this year, which could put pressure on the cost of MPCI premiums should more farmers purchase insurance in more volatile years.
"Farmers with capital take the view that they can ride out a bad year without the insurance but if you have a farmer with high debt and high acreage, could they afford to keep going if the year turns bad?" Ball asked.
Ball said MPCI has traditionally not sold well in WA, but had gained more traction in the eastern states.
"Opting in for one year and then not the next makes it difficult to build a pool of money − which is how insurance works and it needs to be a long-term investment," said Ball.
Ball said there were some five insurance companies that currently offer MPCI, but more would consider it if there was “more traction” in the industry.
There could also be opportunities to add cover for sheep and beef as the growers’ farming operations diversify, the report said.
Deane Allen, MPCI Australia general manager, shared Ball’s views, saying that more people needed to commit to MPCI to ensure better coverage. He remained wary, however, of the Australian government subsidising an MPCI program, saying that government-backed programs such as those in Canada and the US encouraged “poor farming practices,” Farm Weekly
"The program costs trillions to run and what has happened is that there are some farmers who don't even put a crop in but still put in a claim," Allen said.
"This means that the good farmers are left subsidising the poor farmers."
Allen said that for MPCI to work well in the long-term, a large client base is required to spread risk.
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