AUSTRALIAN farmers are set to receive what are believed to be the first substantial payouts for multi-peril crop insurance (MPCI) within days.
Chief executive of Latevo International Andrew Trotter said his company had been told by its reinsurer that it would be paid for its first three claims and was currently finalising the formalities for payment to proceed.
He said he hoped it would be the final step towards widespread farmer acceptance of MPCI.
“I think up until the money hits farmers’ accounts there is always going to be a degree of scepticism, but this proves that the product can work.
“MPCI is going to be huge for agriculture in this country, and we’re really getting some momentum in getting government to understand this.”
Latevo is set to pay three claims immediately, with Mr Trotter saying a total of eight claims are likely to be paid out by the end of the month. The value of the payments is understood to run to millions of dollars.
A good start: GPA
Andrew Weidemann, chairman of Grain Producers Australia (GPA) said he was pleased to hear of the payments, but warned it did not suddenly mean an end to Australian farmers’ battle to manage climate volatility.
“It’s a good start and we congratulate Latevo for entering this space, but there is more to do.
“We still have some concerns with the cost of the product, sure, there will be some people who see the prices as acceptable as they stand, but for most I’d still say the premiums are too expensive.”
He said GPA had convened a multi-peril risk management taskforce featuring leaders from across the grains industry to come up with submissions on MPCI to the government investigation into agricultural competitiveness.
“We applaud commercial businesses for entering the space, and it’s a product that can really help with confidence in our sector, but we still feel government has a role to play on this one,” Mr Weidemann said.
He said the taskforce was advocating the government set up a three-year pilot scheme, featuring incentives for growers to use MPCI, such as tax concessions for those using MPCI and funding a 200 per cent maximum stop loss ratio on losses reinsurers could be exposed to in any one extreme season from extreme weather event, to limit exposure to severe weather events.
Mr Trotter said he had also been lobbying government heavily on the need for MPCI and said he felt he was getting traction.
“We’re breaking down the stereotypes that MPCI can’t work in Australia, people will see growers getting paid out and see it can be done.”
From his company’s perspective, Mr Trotter said he was keen to expand the amount of policies written for the upcoming season, but said it would depend on the demand and the timeframe.
“It’s not like getting normal insurance, the process is more like getting a home loan, so it will take growers time, so if people are interested, they should be thinking of getting organised soon.
“The work in getting an MPCI policy is very much upfront.”
MPCI working in Victoria
Mr Trotter said the benefits of MPCI could clearly be seen this year in states like Victoria.
“We’ve seen the summer rain there and we know the value of controlling summer weeds, but it is going to be a big cost in terms of chemical and farmers’ cash flow are already under pressure after last year’s horror season.
“It would make a big difference in getting capital if growers had MPCI last year.
“They would still be out of pocket, but it would be manageable.”
For Bangerang, near Warracknabeal, farmer Phil Koschitzke, the difference between getting a MPCI payment, or not, is stark.
“Without it, we’re faced with a catastrophic issue, with it, we’ll be faced with a loss, but it will possible to get our crop in this year without too much of a problem.”
Mr Koschitzke has been told by his insurer, Latevo International, that has claim would be paid out.
“We haven’t actually been paid, so we’re still a bit disbelieving that this could actually happen, it will mean a lot if we do get the money.”
He said his local area had endured the brunt of Victoria’s dry season.
“Other areas got some grain even though it was below average, but we were faced with a full-blown, one in 20-year drought.”
He said the insurance would not see him make a profit for the year but would allow him to go to his bank and work out a plan for financing next year’s crop.
“I’ve had people stop me in the street and say they’ve heard I’m going to have a good year, that’s not the case, we’re not ‘mailbox farming’ by any means, we’ll still lose money even with the payout, but it will make things a lot more manageable.
“I had a chat with the bank manager the other day, and he told me ‘we’d be having a different conversation today if you didn’t have this insurance’, so it’s something they’re conscious of as well.
“I’m just so hopeful that this product gets off the ground, not only just for my own business this year, but for all farming businesses in our area down the track.
“This year we saw good operators have an absolute shocker and a working MPCI will give our communities the resilience against these sort of weather events they need,” he said.