New crop insurance offers protection from frost, dry start

AWB general manager for customer Ben Fargher said growers will now be able to specifically insure for frost and crop establishment failure.

He said the idea was that farmers could add on risks specific to their business on top of the basic fire and hail coverage traditionally covered in Australian crop insurance.

“We wanted to allow farmers to pay for what they wanted in terms of coverage, rather than having to fork out for a range of perils that were not relevant to them,” Mr Fargher said.

Farmers will be able to insure for frost with the AWB product throughout this growing season, while the crop establishment feature will be added next year.

Mr Fargher said the feedback was that these two areas were where farmers most wanted cover.

“Frost can be devastating and can decimate yields, while having crop establishment protection allows farmers to be able to dry sow with more confidence.”

Andrew Gregor, AWB product development manager said the crop establishment insurance would be designed to protect the cost of production rather than estimated income.

“Payouts will be calculated on the actual costs in putting the crop in the ground,” Mr Gregor said.

He said the insurance would fit in with a range of agronomic risk management strategies.

“You would probably look at switching crop types for some of the later sown paddocks if the break did not come early enough for long season varieties or crops that need to be planted early, go in for a short season cereal crop for example.”

“For other paddocks where you have dry sown and there is not a good enough establishment this insurance will help out.”

Mr Gregor said the actual cost of the insurance was set by the grower.

“You can select whatever level of cover you like and pay accordingly.”

In terms of the price point, both Mr Fargher and Mr Gregor said AWB was looking to keep premiums low.

One of the major criticisms of commercial multi-peril crop insurance (MPCI) from the farming community has been that it is too expensive.

While Mr Fargher said exact premiums would vary he said if other products were valued at around 10 per cent of crop value, the AWB products would be closer to 5pc.

“We think it can be done at around that price point and that it will resonate with customers.”

Mr Fargher said AWB had identified gaps in the market in the insurance space in covering growers from frost.

“There has been a lot of great work done over the years by growers and research groups to help manage frost risk, ranging from adjusting the planting times to avoid the crop flowering in the high frost risk periods, to selecting more frost tolerant varieties,” he said.

“But it’s fair to say the same level of innovation hasn’t been forthcoming on financial tools to manage the impact of this production risk.”

“We know growers are good at managing things they can control, but want more ways to transfer the risk of things they can’t control, like severe weather events, to another party in the form of insurance. “

In terms of the information required, Mr Gregor said the company had good modelling capabilities which would allow them to set premiums according to likelihood of a dry start or frost.

Farmers wanting to take out frost cover have to take it out over the entire plant of a particular commodity.

“They can’t just choose one paddock that always gets frosted for cover, but what they can do, if they think some areas are less susceptible is to nominate a coverage point to reflect where they feel their risk sits.”