Variability of season is an unfortunate factor that farmers are faced with. Fortunately over the last few years there has been a tool introduced to the Australian market to lessen the loss occurring due to seasonal variability – Multi-Peril Insurance.
In general terms Multi-Peril Insurance (MPI) is an insurance policy taken out to mitigate risk from a number of perils as opposed to general crop insurance covering minimal perils such a hail or fire. True MPI will insure for a guaranteed income or profit, no matter what the natural cause may be.
There are a number of full MPI policies in the market at the moment and also a number of more specific peril insurance policies. The more specific policies may be tied to certain events such as rainfall during growing season. Many policies may also be for a specific paddock or crop type.
MPI has been operating in the USA and Canada for a number of years. However unlike Australia the policies are often subsidised by government. The reason for this is that the government should have no need to provide additional support to farmers for those risks they can insure against.
So how does it work? A full MPI policy generally works to insure an income level. This is done through a review of historical financial results (generally 5 years). A range of offers are put to the farmer, all varying by the value of cover per acre. The more income insured, the higher the premium, but the risk of financial loss is lower. Where a number of lower-than-average years are recorded, premiums will increase for the same level of income. Of course the opposite can happen as well, whereby the premium may decrease for the same level of cover.
Want more information? The first place to start is your general insurer to see if they have MPI polices available. The next option is to Google search ‘Multi-Peril Insurance Australia’. This search will result in a number of hits either providing more information on the market such as ABC Landline articles or links directly to providers of MPI.
Remember not all policies are equal. They may insure based on certain circumstances or events, exclude some crops or require large fees for a business assessment to be undertaken . So do some homework, ask a lot of questions and compare products to ensure the policy is the right fit before going ahead.