The agriculture sector in Australia is a huge part of the statewide economy, and with November’s free trade agreement (FTA) with China ready to roll, the industry is only going to grow over the next few years.
As the population of the Asian superpower edges towards the 1.4 billion person mark, authorities in China are struggling to find the sustenance to keep people well-fed. This will suit many Australian farmers, as high protein goods in both arable and pastoral farms will become more sought after.
The FTA will aim to increase the amount of food that can be exported to the nation (now the world’s largest economy) over the next five years – opening the door to extra commerce in the crucial agribusiness sector.
However, this makes the margins for error tighter; if a farm owner can’t keep up with demand, their investments could flounder. With 99 per cent of Australian farms family-owned and operated, such a financial risk can easily encroach upon an owner’s livelihood.
So, how can a farm improve its financial protection this year and as we move into what is sure to be an important time for the industry? Experts say farm insurance will play a major role.
Insurance unlocking productivity
Australia’s farm owners can find a boost in funding and use this to improve productivity if they have a closer relationship with their business insurance policies, a professional consultancy firm explained this month.
Sydney-based management consultancy Strategis Partners said as much as $8 billion could be unlocked in bank finance if Australia’s farmers were better insured. This money, the firm suggests, could be vital in improving crop yields and driving innovation in the sector.
Managing Director of Strategis Partners Jay Horton said insurers could improve the solutions they offer to farmers and nurture a closer partnership.
“Every season, there’s about $20 billion of broadacre agricultural commodity income risk on the line in Australia, yet only a small portion of that is insured by the outside specialists. In general, farmers are left alone to take on most of the risk themselves,” he explained, according to Asia Insurance Review.
“If crop and livestock incomes were better insured, the flow-on benefits to [agribusiness] sector confidence would unlock a further $8 billion in extra bank finance to support farmer investment and productivity initiatives.”
What’s more, it seems the insurance industry could indeed be moving closer meeting to the needs of farmers, with a groundbreaking new crop insurance product ready to hit the market.
ProCrop ready for launch new product
A new crop insurance product that helps to protect farmers against difficult environmental situations, is being readied for launch in Australia.
The cover, distributed by ProCrop Insurance and underwritten by CGU insurance, helps crop-growing industries against the financial losses of poor yields due to a shortage of rainfall.
If a farm is to sustain financial damage due to receiving less than 50 per cent of their mean average of rain during the flowering period of their crop growth, they will be able to make a claim and recover some of their losses.
The product will make for a stronger overall policy, particularly in Australia, where dry and dusty months can be critical for the grain-growing industries.
Finding support in the farm industry
If you feel like your farm could benefit from a stronger, more inclusive insurance policy, and would like to work closely with a professional to unlock extra financial gains, your insurance broker will be able to help.
Insurance brokers work for you, not the insurer, and have the knowledge and expertise to guide you to a comprehensive farm insurance policy.
To find out more from our industry experts in an office near you, contact MGA – we’d like to hear from you.