This week, the Australian Government announced a reinsurance pool backed by a $10 billion government guarantee to subsidise the cost of insurance coverage for people living in flood and cyclone-prone areas of northern Australia. The pilot program is expected to reduce premiums by more than $1.5 billion for households, strata and small businesses over 10 years. This investment comes after the final report of the ACCC’s three year Northern Australia Insurance Inquiry, released in January, highlighted insurance premiums were, on average, considerably higher in northern Australia than the rest of the country, and over the past decade have increased at a faster rate. Queensland farmers are unfortunately no strangers to natural disasters and weather extremes, however they are ineligible for this subsidy and remain exposed by the nascent agriculture insurance market.
The Queensland Farmers’ Federation (QFF) continues to push for innovation and development in crop insurance options to fill those coverage gaps and better equip farmers for the vagaries of life on the land. Through the Queensland Government’s ‘Drought and Climate Adaptation Program’ QFF, the University of Southern Queensland and Willis Towers Watson are assessing and modelling parametric insurance options for farmers across the state. And together with Queensland’s agriculture industries, have delivered a pilot program with the intention to establish a Discretionary Mutual Fund (DMF) to pool risk, provide a flexible option for crop insurance and empower farmers with a long-term industry owned tool for managing risk.
With climate projections suggesting more frequent and extreme weather events, farmers are looking to better understand, develop and adopt risk management strategies to manage uncertainty and maintain business continuity. Insurance has an important role to play, but there is work to do to develop appropriate insurance products for Queensland’s farmers and provide more affordable and relevant insurance options.
Agricultural insurance remains an underdeveloped risk management tool for farmers, but with the right policy settings, Queensland Government support to prioritise the removal of stamp duty on premiums as in other jurisdictions and capitalisation of a DMF, strategic investment in weather infrastructure and funding to support QFF’s and our partners work, viable insurance options will enhance farm businesses.