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Top Reasons Why Crop Insurance is a Must for Australian Farmers

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crop insurance for Australian farmersIn a country like Australia where huge mining and construction industries are booming, agriculture still ranks first on the list of the most hazardous jobs according to research.

And the danger is not only for farmers themselves, especially when it’s about handling livestock or operating machinery, but their livelihood also undergoes regular threats. For example, even a single freeze or hail storm could totally wash away a crop, putting growers into piles of damages and loss of hope of income.

The solution is multi-peril crop insurance. However, unfortunately, several farmers in Australia are not aware of the reasons why they should purchase it. The fact is that the multi-peril crop insurance can provide farmers in Australia some real peace of mind.

crop insurance for Australian farmers

What is Multi-peril Crop Insurance?

Multi-peril crop insurance (MPCI) is a tool for risk management that framers can utilise to protect themselves from perilous environmental conditions such as wind or hail, natural calamities such as flood and other common perils, including:

  • Insect infestation
  • Accidental fire
  • Damage caused by wildlife

Unlike other insurance tools that protects against only a few risks, multi-peril crop insurance offers coverage against the most common risks faced by Australian growers.

When a farmer buys multi-peril crop insurance, he is able to protect a particular proportion of his harvest, on the basis of typical production in the past. A good insurance company e.g. MGA.com offers insurance when the actual yield is lower than the guaranteed yield because of a peril or mix of perils.

crop insurance for Australian farmers

Why Should You Buy Multi-peril Crop Insurance?

The reason that can be clearly seen to buy multi-peril crop insurance is that this type of insurance can give you financial support during difficult times. However, there are other reasons too for why you should buy this insurance. Here they are.

Great Peace of Mind to Farmers

Farmers are continuously affected by many factors that are totally out of their control. Along with the intense financial strain they can give rise to, these factors are responsible for high amount of stress in rural farming communities.

Several studies have revealed that farming as a profession has several characteristics that put them into poor mental health. It has been even stated in a study published in the International Journal of Social Psychiatry that farmers undergo higher levels of injury as well as suicide.

In such a scenario, sufficient amount of insurance cannot stop a storm or flood from coming. However, it can provide farmers the much desired peace of mind that that they won’t have to suffer from a major financial loss when calamities strike.

crop insurance for Australian farmers

Farmers Get Freedom Due to Insurance to Invest in Other Things

Farmers are usually not seen investing in things like new machinery, seeds, herbicides and fertilizers until they are certain that their harvest won’t be damaged by common perils. This is the reason why they are habituated to expect the worst and always want to maintain certain level of security.

However, with multi-peril crop insurance, farmers get an assurance of a particular level of return on investment. This enables them to invest more into their farming operations all through the year, which will not just expand Australian farming but will contribute to more beneficial farming practices overall.

A Strong Requirement of Multi-peril Crop Insurance

There are around 20 risks that can destroy a farmer’s livelihood. These include hail, frost, wind, excessive rain, lightening, snow, temperature, stress, tornado, pests, fire, plant diseases, cyclone, hurricane and flood, a remarkable expansion from the three risks presently covered under most crop insurance programmes (fire, hail and less frequently, frost).

However, not many insurers have dared to enter the MPCI market. Still, the requirement of more progressive MPCI models has never been higher as according to the Centre for International Economics (CIE) current climate variability statistical predictions are likely to be less useful due to weather changes.

crop insurance for Australian farmers

Challenges

One of the largest challenges insurers are facing is an information imbalance. However, the vagueness of information is lessening rapidly. Thus with better climatic data and a more advanced approach to modelling farmers’ operations, insurers believe that they can really rate MPCI.

Multi-peril Crop Insurance Decreases Bailouts

When a farmer has no insurance, he has to depend upon the government bailouts whenever they undergo major losses. Sadly, these bailouts are inadequate for farmers to cover damages and also they are unreliable. Opting for government funding can be a lengthy, drawn out procedure and there is no guarantee of protection.

crop insurance for Australian farmers

Farmers can Get a Rebate from the Managing Risk Farm Programme

When farmers buy multi-peril crop insurance, they are scattering the risk away from the government, though not fully. Under the Managing Risk Farm Programme, farmers are able to apply for a rebate for buying or making an effort to buy multi-peril crop insurance.

All in all, there are good reasons why farmers should be the multi-peril crop insurance. Then, why aren’t majority of them buying it? Here are the reasons.

When it’s about multi-peril crop insurance, the suspicion of farmers is just one of the several challenges facing the market. And they should not be blamed. After all, anyone being asked to shell out around half a million for an average insurance premium will definitely want to make sure he’s getting the value of his money.

Another factor is that over recent decades, there were many waves of multi-peril crop insurance came and went, causing “bad implications”. Nevertheless a fresh optimism is being seen from farmers as well as insurers that the product will at last establish in the Australian market.

This has happened because government has started supporting the concept. It has been announced by the government that farmers could claim a one-off rebate of up to $2,500 on the price of getting advice on an insurance policy protecting against threats to productivity.

Considering all these points, you’ll agree that multi-peril crop insurance is a must for farmers. If they want to lead a happy life, with financial security for them and their family, there is no better alternative than multi-peril crop insurance for them.

crop insurance for Australian farmers

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