Another tool in the risk management tool box

This week I attended the NSW Government’s Multi-Peril Insurance summit along with other representatives from NSW Farmers.

The summit, part of the Memorandum of Understanding between NSW Farmers and the NSW Liberals and Nationals, provided the opportunity for Government, the farming, insurance and finance sectors to learn about the availability and impact of multi-peril insurance across the world.

It also provided the opportunity to discuss policy and investment options that would increase the uptake and availability of multi-peril insurance products for Australian farmers.

With farmers presently perceiving low value in multi-peril products due to the high up-front cost of policies, the summit considered options to reduce the risk premium created by insurers’ lack of detailed knowledge of weather and farm performance.  Likewise Government incentives, such as refundable tax offsets and grants to facilitate improved take up of insurance as a risk management tool, were proposed.

The summit also discussed options to assist farmers to better understand multi-peril products, such as tools that assist in understanding multi-peril insurance as an option for farm business risk management planning.

Farmers in NSW have a track record as being able to successfully manage the risks of agricultural production over the long run.  However, the move of Australia’s drought policy towards greater self-reliance on the part of farmers means that new tools are needed to manage the risks they face.

NSW Farmers has long advocated for Government policy that facilitates the provision of multi-peril insurance as a tool for farmers to manage the financial risks associated with the impact of emerging drought.

Further, broad multi-peril production insurance products have the ability to provide farmers with the confidence to invest in planting and restocking as they emerge from drought.

Well developed products may also serve as security for seasonal finance facilitating business in our regional communities, particularly during drought recovery.

With NSW DPI developing recommendations for the consideration of Government in 2016, it is important to remember that multi-peril insurance is just one tool that farmers need in their risk management toolbox.

Like all the other tools it has limitations, particularly where farmers are in prolonged drought such as in the far North West of NSW. 

Good drought policy needs to continue to make provisions for such situations and in the communities around Walgett more support is needed right now.  This should not be forgotten as we continue to develop better drought policy for the future.

NSW Farmers View published in The Land 5 November 2015

Contact: Matt Brand CEO NSW Farmers

Phone: 1300 794 000

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