Crop insurers to target WA this year

This was revealed at a WAFarmers and Grains Research and Development Corporation (GRDC) event on the topic last week featuring the opportunity for growers and advisers.

Speaking for insurance brokerage Australian Reliance, principal Peter Burtenshaw shared his market insight that WA growers could expect multi-peril crop insurance to be on the agenda for many insurers this year.

While Latevo was the only insurer around in 2015, he listed several companies offering products in 2016 and said WA was a "spread of risk" for insurers who were dealing with more risky insurance buyers in New South Wales, Queensland and Victoria.

He said the move to using multi-peril crop insurance was not suitable for all farm businesses and detailed farm history and costings would help growers map their needs.

"Almost every farmer I know insures their assets for that one-in-seven-year event," he said.

Mr Burtenshaw said in reality however, these events were appearing more often and margins were tighter and this was where multi-peril products could help.

"Should someone knowing the risk of a loss is much higher and frequency is much greater insure?" he said.

"Or does it become a commercial reality of running a business in terms of this happening every five or six years (and needing multi-peril coverage)."

The event also included presentations from John Thompson of Hall Chadwick and WAFarmers vice president Tony York on a personal level as a multi-peril crop insurance cover buyer.

It was attended by more than 80 people and WAFarmers chief executive officer Stephen Brown said the information would help attendees de-risk farm businesses.

"The definition of risk has changed considerably over the last three decades," he said.

"WA weather can be incredibly varied and severe, and as global warming continues to impact the climate in our State, the importance of having insurance against weather events cannot be overstated.

"Over the last two years, WAFarmers has spent considerable time and money attending industry events and seminars on MPCI as we believe this product, when fully matured and developed, has the potential to be the next big thing in agriculture, de-risking the operations of many farmers in highly volatile rainfall areas."

While multi-peril crop insurance has been targeted at grain growers, Mr Brown said it could also be extended to cover a variety of other crops for the both the fruit and vegetable industries, with a recent case being the significant damage to fruit and potato crops in and around Manjimup as a result of recent heavy rain and resultant flooding.

Mr York highlighted to the crowd the decision to invest in multi-peril crop insurance was a budget decision, where a return could not always be expected.

Instead, he said growers should consider it a safeguard for their business.

"The best way I look at it is the risk isn't the same as it was 30 years ago," he said.

"Looking back and analysing since I was growing crops as a 20-year-old, for every dollar I put in the ground I was going to get more than $3 back in an average season.

"If I put a dollar in the ground now and if things go well I'm going to get $2 back.

"My margin has just shrunk, it's not there and on top of that I've got new technology and I'm invested in sophisticated farming systems so I'm spending more money to put the grain in the ground.

"If things go wrong for me now it really hurts and it doesn't seem just.

"It's cruel it's unfair, it doesn't make sense."

Mr York said he and his brother would be investing again in multi-peril crop insurance despite not making a claim this year.

"In an economy that's encouraging you to build your business - you want to match the rest of the population so you keep pushing your business," he said.

"But you get a bad year and it wipes you out.

"We had an ok year last year.

"So you could say we just threw that money away by taking the policy as we didn't make a claim and it's been a drain on our cash flow.

"But I'm pretty sure we will take that policy out again next year because we don't want to go through that process of that one-in-10 or one-in-15 year event which has happened more than once in the last 15 years."