It is speculated that MPCI is in for a major boost if Labor wins the forthcoming State election, as it is understood that the party will scrap stamp duty on MPCI as part of its agriculture policy.
This follows an election promise by the Nationals WA to push for stamp duty exemption in MPCI policies for a period of three years.
The removal of stamp duty will see farmers saving about $5,000 on a $50,000 policy for an average 2,500ha broadacre farm, The West Australian reported.
MPCI policies typically cost between $15,000 and $20,000 per 1,000ha of crop, and covers loss for crop yields from natural causes, such as drought, excessive moisture, frost, and disease, or in some new policies, changes in market price.
WAFarmers president Tony York said the lobby group has advocated for the Government to encourage a higher take-up rate, and that a stamp duty exemption on MPCI would be “very encouraging for the grains industry,” the report said.
“We are hopeful that, if elected, a Labor commitment towards this will result in a greater uptake of MPCI policies,” he said.
York said the market needs to be stimulated so underwriters can spread the risk across a larger number of policies and make policies cheaper.
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“By fostering the uptake of the policies across the agricultural region, it reduces the reliance on concessional loans and leaves public funds available for better use, creating another revenue stream for the state by having it collect duties from a larger number of MPCI policies once the three-year concession period has concluded,” he told The West Australian.
David Cox, who runs 10,000ha of mixed enterprise farms at Esperance and East Hyden, with his wife, said the removal of stamp duty means significant savings for farmers, and, if implemented, would make him reconsider taking up a policy.
“Currently in Esperance, insurance would be in the vicinity of 0.2% of volume of the crop; MPCI has been forecast to cost up to 5% of the crop value.
“So for a $2 million crop, it would cost the farm $40,000 in general insurance, $4,000 in GST and $4,400 in stamp duty. MPCI for a $2 million crop would be $100,000 for insurance, plus $10,000 GST and $11,000 in stamp duty.”
Cox said insurance providers need to make more cost-effective products available to consumers.
“At the moment, insurance companies are keen to hedge their bets, with an all-in approach requiring people to cover crops and locations that may be less at risk of natural ‘disasters’, like frost,” he claimed.
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