A CSIRO-backed crop insurance product designed to curb nitrogen use has made its first payout.
The Queensland claimant received the payout when his reduced N use led to yields lower than modelling had projected.
Russell Mehmet, account director at Brisbane-based insurer WTW, said the one-year-old N insurance product was based on simulations using Bureau of Meteorology rainfall, temperature and solar radiation data linked to individual farm location and soil type.
“This is a modelled outcome, a simulated yield result based on many hundred of thousands of calculations that have been done over 50 years,” Mr Mehmet said.
The recorded loss in July saw no assessor visiting the cane property; assessment was made against the model co-related to seasonal conditions.
“Payment was in the grower’s account within seven days of the BOM reading, so he couldn’t be happier.”
Addressing a Queensland Government hearing last week, Mr Mehmet said the insurance model could be applied across other agricultural sectors, notably feedlots.
“I can see it lending itself to any agricultural sector, any crop that has suitabilility.
“Broadacre is very big; it could potentially be done using satellites measuring soil moisture.
“A fair bit of research would have to go into it.
“For livestock … there’s definitely potential, particularly feedlots.”
The government panel was investigating the impact of climate change on agriculture.
Mr Mehmet said the new parametric system of insuring, developed through funding from the Great Barrier Reef Foundation, aimed to compensate farmers while reducing N use.
“It’s unique; it’s a standout opportunity to protect farmers against their loss of yield if they reduce their use of nitrogen.”
He suggested “concessionary support”, otherwise known as a subsidy, to encourage uptake of the nitrogen-risk insurance underwritten by Liberty Specialty Markets.
“They’re the sort of global insurer that are interested in these sorts of thing, whereas for local insurers, it’s not for them.
“They want to see indemnity insurance: you have a loss, you get damage, it gets fixed up, and you get paid when it’s fixed up; that’s the insurance we
see day today.”
Mr Mehmet has spent five years working with the University of Southern Queensland, the National Farmers Federation and CSIRO “working on innovative insurance products that have been very elusive to find so far.
“Unfortunately the insurance industry really hasn’t come to grips with providing a worthwhile strategy for insuring agriculture,” he told the panel, noting that other governments such as the US, EU and India subsidise farm insurance.
“Australia relies on the government payouts (after disasters) and so do the farmers.
“We’ve talked to many of them and they say: ‘Why should we spend that money on insurance when we get the payout from the government anyway?’ ”
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