AgInsure
Newsletter
May 2017
Welcome
A brief introduction on why we exist.
W
hen I joined the
specialise in something other than
Government Insurance
food production.
Office of NSW in 1989,
So, in less than a generation, we
I was surprised to learn that they had
were able to develop commercially-
a space underwriter.
sustainable space insurance. And
Sputnik 1, the first artificial Earth
yet, ten thousand years after farming
satellite, was only launched into orbit
started, there is still not a viable
by the Soviet Union on 4 October
insurance product in Australia that
1957, heralding the start of the space
will cover a farmer’s crops and
age. Just thirty-two years later, I was
livestock against drought loss.
invited into the GIO space
underwriter’s office to watch the
How is it that during my
launch of an insured satellite where
lifetime a comprehensive
in a few minutes we would learn if
insurance market has
the company had made hundreds of
developed for something as
thousands of dollars, or lost millions.
inherently risky as rocket
To put this in context, about ten
thousand years ago, our ancestors
launches while farmers, who
Working out the answer to this
question has led directly to the
formation of AgInsure. We are four
have been around for over
insurance professionals, with
chose to settle down to become
ten thousand years, still can’t
collectively over 100 years of
farmers. This one decision made
insure against drought?
possible everything we take for
experience, who have come together
because we believe we can offer
granted in our modern world. For
Ever since joining GIO I have
the first time, a food surplus was
been asking the question: “How is it
produced that allowed some of our
that during my lifetime a
ancestors to specialise in activities
comprehensive insurance product
commercially viable Multi-Peril
other than food production.
has developed for something as
Insurance (MPI) product to help
inherently risky as rocket launches
farmers survive natural perils like
that our farmers have become vastly
while farmers, who have been
drought so they can adapt to the
more efficient. In Australia, over
around for over ten thousand years,
challenges that climate change will
97 percent of the population
still can’t insure against drought?”
bring.
Today, the only real difference is
Australian farmers a better deal on
insurance against natural perils.
Our mission is to develop a
MPI – the story so far
percent of government drought
Back in the early 1990s at GIO we
assistance goes to livestock farmers.
product to mitigate the effects of
The difficulty is that risks such as
natural perils such as drought, to
tried the incremental approach to
The lack of a viable insurance
developing a MPI product. We
drought are systemic risks – they will
help farmers manage their own risks,
added the additional peril of frost to
affect all farmers in a region at the
is a serious problem for which the
the standard winter crop insurance
same time. However, there are
insurance industry has not yet been
product that covered the perils of
solutions to systemic risks that have
able to provide a workable solution.
hail and fire. This turned out to be a
been developed in other areas, such
bad idea.
loan mortgage risk for banks – if a
AgInsure believes we can develop
the right products to provide
The mistake we made was tacking housing market bubble bursts then
the value of all housing collateral for
a new peril, with a different risk
Australian farmers with the tools
profile, onto an existing policy
loans reduces, as happened in the US
ahead for sustainable agriculture.
structure that had developed around
during the GFC.
the risk profiles of hail and fire –
both predominantly end of seasons
risks.
How can it be that the most
important activity for the
Current Multi-Peril Crop
continuity of our modern way
Insurance (MPCI) products are
of life cannot obtain the same
making a similar mistake. A cyclical
protection against a systemic
peril like drought cannot be tacked
risk as a bank?
onto an annual policy – multi-year
policies are needed. And they need to
How can it be that the most
insure more than some winter cereal
important activity for the continuity
crops.
of our modern way of life cannot
Current MPCI products are far
obtain the same protection against a
too limited to be attractive for many
systemic risk as a bank?
farmers. They have struggled to be
Why MPI?
economically sustainable in the
Australian market and many are
seeking premium subsidies, which no
Australian government has yet
supported.
A new horizon
We believe it is time for farmers to
take matters into their own hands.
Just as our ancestors did ten
thousand years ago, it’s time to stop
doing the same old thing and try
another approach. AgInsure is here
to help farmers and do what the
insurance industry has not yet been
able to do – produce a commercially
viable, sustainable MPI product that
covers all a farmer’s activities.
If you would like to know more
about us or read more about our
ideas, visit our website.
Putting the need for multi-peril
If you would like to contact us
insurance in context, during the
email me at [email protected]
‘Millennium Drought’, annual rainfall
was 73 mm below average, or 12.4%
below the 20th Century mean for the
Something better is needed
years of drought (1997 to 2009). By
MPCI has made a faltering start in
mid-2010, the Australian
Australia over the past couple of
Government had paid $4.4 billion in
seasons. However, in its current
direct drought assistance to farmers.
form it plays only a minor role in
they need to meet the challenges
However, this economic cost is
protecting crop farmers and
small compared to the human cost.
mitigating the risks they face. For
The male suicide rate during the
crop farmers, this is a significant
Millennium Drought for Queensland
shortcoming, but for graziers there is
farmers was more than double that
no cover at all, and in NSW over 80
for the population as a whole.
David Blackett
Managing Director
Note: The information in this document
is by its nature general. It is not financial
product advice. Readers should seek
professional advice before making any
decision about insurance.
For more articles or information about AgInsure go to our website ─ www.aginsure.com.au