- Feasibility of agricultural insurance products in Australia for weather–related production risks
This National Rural Advisory Council (NRAC) report assesses the feasibility and practicality of implementing ‘traditional’ multiple peril crop insurance and ‘index–based’ insurance in Australia. It provides an outline of how agricultural insurance operates in other countries, considers risk management options in Australia, local experience with different types of agricultural insurance in the broader context of managing risk, and provides NRAC’s discussion and findings.
In conducting its assessment, NRAC consulted with a wide range of stakeholders – including representatives from grower groups, national and state farming organisations, agribusinesses, peak industry bodies, agricultural insurance providers, the banking sector and Australian and state and territory governments. In addition, NRAC reviewed available literature on agricultural insurance and observed past and present experiences of agricultural insurance in Australia and overseas.
A summary of NRAC’s report findings include:
- The risk management market for Australian agriculture has been developing since previous reviews of multi peril crop insurance (MPCI) in 2000, 2003 and 2009.
- Although insurance–based risk management products such as MPCI are not available in Australia, farmers have adopted a variety of approaches to mitigate production risk.
- Without substantial government support, multiple peril crop insurance options, including MPCI and mutual schemes, are not likely to be viable in Australia.
- Index–based insurance products (to manage variability in weather and yield) are commercially available and there is potential for these products to develop further.
- Governments have a role in assisting Australian agricultural industries to increase their self–sufficiency and to better manage weather–related risks to production.
- Governments also have a role in supporting data collection and management. This can increase access to user–friendly climate data that can assist farmers to make better risk management decisions.
- An important challenge for industry and government is to increase awareness of insurance options, for example through training, as part of a broader role in building capacity to manage risks.
NRAC also considered ABARES’ report ‘Options for insuring Australian agriculture’ in undertaking its assessment. ABARES’ report considered how a multiple peril crop insurance (MPCI or mutual scheme) might apply to Australian agriculture.
Download the ABARES report here: