Only 13% of grain growers are considering multi-peril crop insurance (MPCI), despite the constant threat of drought, wind, frost or disease slashing their income.
Mr David McKeon, chief executive of GrainGrowers, an independent organisation which represents grain farmers, said surveys of his members showed that a lack of understanding of the available insurance policies and their perceived high cost contributed to a low uptake among grain farmers, according to a report in The West Australian.
MPCI covers a range of perils in a single policy, including those excluded from named peril insurance, including drought, excess rainfall, wind and wildlife damage.
Only 1% of New South Wales winter crop producers took up MPCI, but about 75% were covered by named peril insurance, according to a Deloitte report. The high cost was the key reason for the low uptake of MCPI.
Deloitte stated that premiums were typically in the range of 5% to 10% of the crop value compared to 0.55% to 3.5% for named peril insurance. Pricing for MPCI products varied depending on location, level of cover and the amount of risk understanding the underwriter had.
Mr McKeon said MPCI was just one tool to manage the risk of crop losses and GrainGrowers did not advocate any particular tool.
A study by consultants Farmanco for the Grains Research and Development Corporation released in February stated that MCPI was not the “silver bullet” to protect a poor-performing business.
The GRDC report concluded that a profitable farm business with low debt offered the best long-term insurance. A highly profitable farm with higher debt could afford to forsake profit to reduce risk with products such as MPCI.