INSURANCE companies aren’t usually a farmer’s best friend, because the money paid into policies is often never seen again.
Hence any sales pitch for a 'new fandangled' product tends to be approached in a somewhat sceptical manner.
However, Australia’s farming sector holds big potential for new risk management products, both for the investor and the user.
Whether it's a product which covers input cost recovery, revenue or loss of crop due to floods, drought or frost, the need to take out policies in what is an increasingly variable climate is also becoming greater.
The rural economy needs a boost to get rolling again and will only turn around if farmers are confident they’re not throwing their money away.
Our government provides plenty of taxpayer dollars to support insurance in other industries, be it health, social security, superannuation or motor vehicle insurance, but has thus far been reluctant to develop products for agriculture.
Providing products which remove a chunk of the risk would have the flow-on benefits of healthier rural communities, because even if a crop failed, a farmer would be in a better position to pay local businesses for their input costs as well as retain staff.
With the handful of producers who have taken up some of the new insurance products, we are already getting a glimpse of how it adds confidence to their decision making and the windfalls this can produce.
By providing that safety net, farmers are given a comfort zone to make the best decisions, not just the safe decisions.
If the season comes through with a lineball rain result, the extra, better quality inputs that farmer had the confidence to apply could have been what was needed to get the crop over the line, hence avoiding a crop failure and a payout.
While the producer might wave goodbye to the policy cost for that season by taking a payout, they will have potentially reduced their premiums in the future.
If good rain fell, then the risks taken on inputs had the ability to pay-off well, putting more cash in the farmer’s pocket for re-investment or as a 'haystack'.
Better insurance therefore has the potential to be a catalyst for helping kickstart a better farming economy.
It’s not the whole answer, but it’s one which can have a big impact.