Toward a Stable Farm Sector - Multi Peril Insurance

Farmers First began life with the intention of facilitating the delivery of a Multi Peril Insurance product for the cropping sector around Australia, and once bedded down, rolling it out to other cropping and then livestock industries.

Most of the rest of the developed and even developing world has this insurance cover, and in many nations, it is very heavily subsidised and has been for decades. The US and Canada are but a couple of our competitors who utilize Multi Peril with the assistance of Government.

Farmers First promoted and sold the Multi Peril Insurance offered at the time by Latevo. After extensive research, we judged their Multi Peril offering was good cover that was capable of rapid expansion, and flexible enough to move at the speed required to accommodate rapid growth. It was not the only successful model available at the time.

However it has to be said that the cover provided in the last year of operation, was of a very high class and payouts to our clients as a result of a poor year were the very reason many were in business the following year.

It really needs to be said that the program and policies worked and were very effective at providing an income cover that removed the risk of seasonal or other failure. It’s a tribute to Latevo and its underwriters that they were able to get it delivered and successfully made the payouts amounting to number of millions of dollars to the Multi Peril covered customers.

In the end, the difficulty of retaining a satisfactory underwriter plagued the Latevo Company scheme. Initially, the well-known insurer Lloyds was the underwriter, but for reasons not clear to me they withdrew, and the program no longer had legs.

No matter, without underwriters the product was withdrawn and Latevo is left trying to make its way as a Mutual.

Farming is a very volatile business; crop production has likely the highest level of variability and is also prone to wild cards, which destroy capital and lives and could be avoided if the nation had an effective insurance cover for these risks.

The product needs a high very level of uptake across different climate and cropping zones to manage profit to attain viability. We failed to successfully obtain sufficient grower support. The risk that is always taken in the end by Government, when seasons are failing and farmers turn to government to rescue them, with the result large payouts from the public purse can be depoliticized.

Its worth considering whether the couple billion spent on average by the Commonwealth each year would be better directed to a cover which removed the politics from the equation. It bears interesting postulation to reason the desire to refrain from support.

I have myself (together with others) utilised politics to obtain hundreds of millions of dollars for farmers from both the Labor side of politics and interestingly from the conservative side the very next year, it’s a well worked road well understood by politicians, farmers and media.

If there is any problem with this, it is that I believe the politicians enjoy the fact that they can get on the TV time and time again in crisis, promise and even sometimes deliver millions of dollars to their constituency, more often than not with a push from city voters. In the end it is animal vision in the media, more than the economic or humanitarian need. But the problem is not solved, and an inevitable cycle has entrenched in the lives of farmers, from crisis to crisis.

My proposition over the years has been that it is imperative to have the bush as functional and profitable as we can, on the basis that it contributes upward of 1.5% to GDP. Without the activity of a healthy rural Australia, this activity cannot find its way into our national economy and we are all the worse of for that.

Therefore an income protection system will, I believe, assist greatly in proving the key driver for the national economy, that is we all benefit form the intervention and it simply makes good sense.

Also, and very importantly, if farmers could remove the risk of production from their finances they can also move to focus on lifting that very production and resultant economic output by making decisions to do with production and productivity, based on input efficiency and profit, rather than reducing inputs either because they have had a poor year and are a bit short or think a poor year might come and with a heavy eye to precaution pull back, both with resultant performance reductions and national economic constriction.

Multi Peril cover would just be the start, in building strong vibrant rural communities, which we all love, and when they spend their money it invariably finds it way to the city, they are therefore a primary driver of the national economy. Its time for government to re engage.

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