THE cost of insurance has jumped by up to 35 per cent in 2012, driven by a run of extreme weather events.
While farmers won't be hit with all that rise in their next premium, it points to an inexorable climb in a fixed cost that is already denting farm returns.
Weather-related catastrophes last year cost Australian insurers $5.25 billion from about 300,000 claims, the Insurance Council of Australia told the Sydney Morning Herald.
Weather-related claims are hitting insurers worldwide. In its June "Global Catastrophe Recap", reinsurer Aon Benfield catalogued billions of dollars in damage just for the month.
The list included two billion-dollar-plus events in the US - the Colorado wildfires and Texas storms - with other separate hail, flood and cyclone events adding at least a billion more.
Flooding in China caused more than US$3 billion in damage, while severe storms in Western and eastern Australia had damage bills in the millions.
The Oceania region, which includes Australia, produced 17 per cent of the world's insured property losses last year, compared to a long-term average of just three per cent, NRMA Insurance told the Herald.
The effect on consumers will depend on how their insurer decides to pass on the costs.
While the cost of buying insurance has risen substantially for insurers, those costs will trickle through to consumers at a much slower pace, according to Jon Fox, Elders Insurance general manager of operations.
"We don't necessarily see an immediate and drastic impact on current pricing as a result of recent weather events," he said.
Insurance companies use a long-term average - typically calculated over five years - to factor in the cost of weather events. "That takes the unexpected spikes out of the premiums."
For Elders Insurance, 2012 has so far been "a reasonably average year" for weather-related claims. Last year was a good year for the company, Mr Fox said; 2010 was a bad year.
"While we've had a number of weather related events over the past three years because of the climatic cycles, when you take a five or 10 year view, it's what we would expect."
The company is projecting "a more normal experience" with weather over the long term.
"Obviously, frequency is only one side of the story; severity is the other side. As an industry, and perhaps as a society, we've seen a greater frequency of catastrophic events in the past couple of years. I don't know that's going to change over the next couple of years, but I think it will return to a more normal level of lower-level weather events."
In a business that deals with uncertainty, Mr Fox is certain of one thing: Australian grain growers are unlikely to ever get the comprehensive crop insurance that some of their peers enjoy in other countries.
Elsewhere, crop insurance is heavily subsidised by government, Mr Fox said. Without that support, insurance companies have no prospect of offering comprehensive crop insurance at a viable rate.
