THERE has been a drop in WA growers taking out multi-peril crop insurance (MPCI) this season as many punt on what is looking to be a bumper year.
However insurance brokers warn that the "opt-in, opt out" behaviour could lead to higher premium costs during leaner years.
Country Wide Insurance Brokers managing director Ray Ball said they had not sold any policies for this year, which could put pressure on the cost of MPCI premiums if large numbers of farmers purchased the insurance in more volatile years.
"Farmers with capital take the view that they can ride out a bad year without the insurance but if you have a farmer with high debt and high acreage, could they afford to keep going if the year turns bad,?" Mr Ball asked.
He said traditionally the MCPI product "had not been sold well" in WA and there had been more traction for the product in the eastern States.
"Opting in for one year and then not the next makes it difficult to build a pool of money - which is how insurance works and it needs to be a long-term investment."
Mr Ball said currently there were approximately five insurance companies offering MPCI, but more would consider it if there was "more traction" in the industry.
There could also be opportunities to add cover for sheep and beef as growers diversified their farming operations.
MPCI Australia general manager Deane Allen echoed Mr Ball's comments, saying there needed to be more people committing to MPCI to ensure better coverage. However, he was wary of the Australian government subsidising a MPCI program, saying that government-backed programs such as those in the United States and Canada encouraged "poor farming practices".
"The program costs trillions to run and what has happened is that there are some farmers who don't even put a crop in but still put in a claim," Mr Allen said.
"This means that the good farmers are left subsidising the poor farmers."
He said long term the product could work well, provided there was a large client base to spread risk.
This comes in the wake of the New South Wales Independent Pricing and Regulatory Tribunal (IPART) making a draft recommendation to the NSW Government to spend $40 million on a rebate for farmers who take up MPCI.
Speaking at the Australian Grains Industry Conference (AGIC) in Melbourne two weeks ago Andrew Trotter, Latevo International, said the NSW IPART had made a draft recommendation to the NSW government to spend $40 million on a rebate for farmers who take up MPCI.
"I'm very confident this proposal will get across the line and it will have a big impact on the MPCI sector not just in NSW but across Australia as it brings that liquidity to the market as more people participate," Mr Trotter said.
The IPART recommendations are for a five-year subsidy program.
The money would be spent on a 50 per cent rebate for growers in the two years they used a MPCI product scaling down to a 25pc payment for the following three years.
Should it be implemented, the IPART recommended program would offer a much greater incentive for NSW growers to take out MPCI than the current Federal government system, which provides a rebate of up to $2500 for an audit to assess a farm business's suitability and eligibility for MPCI.
Mr Trotter, who has tirelessly promoted the MPCI concept in Australia, said the proposal could be the catalyst to bring Australia's MPCI sector, which has received much media attention but has not attracted large numbers of grower participants, to life.
"There's no doubt in my mind we need a vibrant MPCI sector in Australia, hopefully this scheme can get farmers to participate and once they do I think they will soon find it a routine part of their yearly planning."
Mr Trotter reaffirmed his view that the price of MPCI products, commonly called out by farmers as an obstacle to their use of MPCI, was fair.
"It works out around 3.7pc of revenue, $20 a hectare or so, the same price as some of the sprays farmers put out, so I really don't think it is the major barrier to participation," he said.
Mr Trotter said he thought MPCI would help east coast producers close the gap between actual and potential yields in a given season.
Citing research conducted in a joint Grains Research and Development Corporation (GRDC) and CSIRO project called Yield Gap Australia, he said farmers on the more climatically volatile east coast had a bigger discrepancy between actual and potential yields.
The project, headed up by researcher Zvi Hochman, found this was because east coast farmers did not want to spend too much because of fears of the season shutting off early.