Struggling crop insurance program facing rehabilitation

Despite releasing incorrect figures in a recent media statement, industry has agreed with Shadow Agriculture Minister Joel Fitzgibbon’s concerns that the $29.9 million farm risk management initiative - first announced in the Coalition’s Agricultural Competitiveness White Paper released in 2015 - has suffered from low uptake.

Under the program, individual farmers have been able to seek a $2500 grant to help meet the $5000 cost of being assessed on their suitability for MPCI.

But two years into the program, Mr Fitzgibbon said the White Paper’s funding for farm insurance advice and risk assessment was “now a sad joke” because only $9000 had been allocated in rebates, while about $40,000 was spent advertising the program.

“This in another example of poor policy development and program design under (Agriculture and Water Resources Minister) Barnaby Joyce’s watch,” he said.

However, Mr Joyce’s office and Mr Fitzgibbon’s - which took the numbers from outdated responses to questions on notice - both confirmed the figures quoted on the MPCI program uptake were incorrect and that $107,000 had been paid to 48 farm businesses.

While the government has no appetite for subsidising insurance companies to help establish a MPCI, it is now looking to hold talks with grains industry groups to try and use the remaining funds to serve the risk management intent of the four year program announced in the White Paper, while being able to meet any ongoing demands of the original insurance assessment rebates.

Department of Agriculture and Water Resources Secretary Daryl Quinlivan told Senate estimates last month “we have had a pretty strong go” at the farm insurance advice program.

“The objective of it was to try and stimulate a private market in multiperil insurance, but I think we are getting towards the point where we think that we are not able to stimulate the development of that market in Australia for various reasons,” he said.

“I think we are regarding that as a policy experiment.

“There are unspent funds in that program - I do not know (how much).”

Grain Producers Australia Chair and Victorian grain farmer Andrew Weidemann said Mr Fitzgibbon was correct and the MPCI assessment program was essentially “a waste of effort”.

“I was never a huge supporter of the business management scheme in the first place and what’s happened is what I predicted would happen - that there’s been poor uptake,” he said.

“Just offering up a business risk management program isn’t going to set up a successful industry.

“I think Joel was right and it has essentially been a waste of effort so far but all sides of government agree something needs to happen.”

Mr Weidemann said a round table involving farmers, industry, insurance agents and government was now needed to “flesh it out properly and continue the push” for a MPCI.

He said there was currently no great need for the insurance scheme because the weather was good and growing conditions “great” for farmers.

But now’s the time to be doing something about it so people are more prepared for when the next drought occurs, he said.

“The money’s still there and so we need to look at other ways of using it to help manage risk, in the longer term,” he said.

“Right now nobody is knocking on anyone’s door saying we’re struggling because it’s too dry so we need to keep this on the political agenda before we hit a massive dry spell and everyone’s out asking the minister for something to be done urgently, because the sky is falling in.

“But we need to get the rubber on the road – there needs to be immediate action.”

Mr Weidemann said insurance companies were working on MPCI products but they weren’t seeing any real assistance provided by the government for subsidies.

He said the tax incentive write-off measures introduced in the White Paper for farm items like grains or hay storage, had acted as a means of managing risk and assisting farmers with drought-preparedness.

Mr Weidemann said insurance products must still be developed to be used by insurance companies in the longer term, rather than a yearly basis, but currently the premiums were “excessively high which is deterring growers from participating”.

“I’m not just talking about needing a MPCI for the grains sector either,” he said.

“Livestock industries can also use one, if it actually helps to manage their risk, but everyone recognises if we can make it work in the grain sector we can make it work for other commodities.”

GrainGrowers General Manager of policy and advocacy Daid McKeon said the MPCI initiative had faced a program design and it was disappointing uptake had been low and the communication of available assistance hadn’t reached all growers.

Mr McKeon said producers growers knew the full range of products on the market and available assistance in the grains industry and hoped to be release results in coming weeks.

He said that work came on the back of a member survey conducted in February which showed that more than half of participants were possibly considering MPCI.

But 42 per cent said they didn’t know enough about the level and type of available coverage suggesting a need for more promotion of the insurance schemes, he said.

“In the White Paper the intent of the program was about farm risk management and we support the government’s commitment to this,” he said.

“It is pleasing that there is now recognition that we need to tweak the program to ensure it works for farmers.

“GrainGrowers’ National Policy Group is considering the changes needed to the program at its July meeting and will develop a proposal for the government’s consideration.”

GrainGrowers also provided information saying under the current US Farm Bill, grain farmers there were subsidised 62pc of their insurance premiums, amounting to an average annual government contribution of $US 6.5 billion per annum, during 2014-16. 

Mr McKeon said considering Australian grain farming was exposed to international markets and variable climate, more than any of our international competitors, risk management was at the forefront of farmers’ minds throughout the season.

“Production and price risk are both key areas where farmers actively seek tools to assist with managing through the ups and downs of seasons and markets,” he said.

“MPCI is just one of the many tools farmers consider in their risk management decisions.

“Our survey at the start of the year asked growers about options for support and the role of government but this was largely focussed on support to assist with MPCI, rather than broader risk management.

“But it showed tax incentives to reduce premium costs and investment in improvement of weather-related information were top of growers’ minds.”

Mr Joyce spokesperson said the government was committed to delivering assistance for farmers to explore their farm insurance options over the full four years, as announced in the White Paper.

The spokesperson said lower than expected demand for the $2500 grants gives room for the government to work with the grains industry to identify additional potential options to help drive a cultural change in favour of on-farm risk management.