LATEVO has entered into a mutual-fund model which is able to universally waive stamp duty on farm-income protection premiums, and can offer its members rebates in high-yielding years.
“It’s an exciting new development, because it allows farmers to share in more of the upside in good seasons,” Latevo director Andrew Trotter said.
“It means there can be a membership rebate when it’s appropriate, and when the board advises.”
The mutualising of Latevo gives it structural similarities to two of Australia’s best-known agricultural co-operatives, CBH Group in Western Australia, and dairy business Norco.
Membership of the mutual fund comes at a cost of $500 for growers insuring 1000 hectares or less, $1000 for 1000-3000ha, and $2000 for more than 3000ha.
“Being a mutual fund now means we can offer multi-year contracts, and provide more consistency in terms of who we reinsure with, so it’s a much better longer-term structure.”
“Becoming Latevo Farmers Mutual also gives us greater global access to global reinsurance.
“The biggest advantage in us now being a mutual fund will be to farmers in Queensland and Western Australia, because their state governments don’t offer a rebate on stamp duty for farm-income protection.”
Mr Trotter said now was “crunch time” for farmers in terms of making a decision about whether to take out farm-income protection at the lowest possible premium as they prepared to plant their winter crops.
“We have no ability to get extra capacity at the discounted rate from 1 May onwards, so if farmers want to protect their incomes, I suggest they do it this month.”
Latevo first offered policies which covered crops against a range of perils including germination failure and frost damage in 2014.
“We have a 30-per-cent price rise in our premiums as of 1 May, and that’s because the later in the season farmers take out policies, the greater the risk we need to offset with our reinsurers.”
Latevo offers policy-holders coverage at three levels, which will pay out from a minimum 40 per cent and maximum 90pc of farm revenue.
Depending on farm location and productivity, the cost per hectare of premiums at the discount rate ranges from $15-$30 per hectare.
“That’s the cost of a summer spray.”
Call to advisors
Latevo last year provided income protection to 120 growers spread across all Australian states, with the bountiful harvest in most of Western Australia helping to neutralise the impact on the company from claims made by policy-holders in drought-hit parts of NSW.
Mr Trotter estimates that only 1pc of Australian growers take out farm income-protection policies, and said reticence from the advisory sector to engage with the concept had impeded its growth.
“The people around the farmers aren’t familiar with the product.”
To help counteract this, Latevo is holding a series of free information sessions in capital cities next week aimed at insurance brokers, consultants, accountants and bankers.
Claims made on the 2018 winter crop saw Latevo pay out more than $14 million, mostly to growers hit by frost in the wider Lake Grace district of WA, and by drought in NSW.
At Garah, northwest of Moree, Tom Ferguson, with wife Dimity and her father Geoff Hunter, grows dryland winter crops and opportunity summer crops.
He took out his first Latevo policy in 2015, and has taken out subsequent ones in every year since for around $23/ha.
“We did it because if we had a failure, we’d be starting at zero in terms of our planting costs, and not in the negative.”
Since 2016, seasons have been tough at Garah, and Mr Ferguson has made two claims with Latevo.
“In 2017, we harvested a crop, but our yields didn’t give us enough revenue per hectare to class it as an average year.
“In 2018, we planted a little bit of barley and didn’t get enough rain to get it going, so we claimed on crop establishment failure.”
“We’ve been through two seasons where we’ve paid, and got paid quicker than if we’d harvested and sold the grain.”
Mr Ferguson said income-protection insurance was now firmly entrenched in their farm management.
“Farming is a big revolving cycle, and having this kind of insurance helps us in the tough years.”