Northern Mallee grower John Gladigau is a well-known advocate of collaborative farming, and last year was part of a grower collective which launched a mutual fund to offer insurance options to members. In this article originally published on LinkedIn, he offers insights into evolving risk management solutions for farmers.
OVER the past couple of years I have been involved with a group of leading farmers across Australia looking at managing farm risk.
It started out as a discussion on multi-peril crop insurance (MPCI) between a group of fellow Nuffield Scholars, but has since moved into a much bigger discussion around how we create a culture within our farm businesses to minimise claimable events, but still ensuring our assets and balance sheet are protected.
Some of the reoccurring conversations have been around the types of insurance products farmers are offered, from fire and hail, farm pack, vehicles, machinery, MPCI, weather derivatives and more, how these are developed and whether they actually cover risks farmers are looking to cover.
Interestingly, if you ask most farmers why they have insurance they will say it is really to cover them in the event of a disaster — the big crop fire or huge hail event, the header fire, the vehicle write off or the storm that takes the roof off their house.
And yet, a lot of the actual insurance marketing seems to be around smaller things and additional benefits including low or reducing excesses, free windscreens and additional covers for things some don’t even know about, or may not even want.
Another frustration amongst farmers is community rating.
I had an insurer say to me at one point when I questioned why harvester premiums had risen so much in one year.
“If all farmers blew their harvesters down once a week to reduce the fire risk, and they carried at least two fire extinguishers on board, premiums could be significantly reduced,” he said.
I told him that on our farm, we spent about 20 mins blowing down every machine every night when we finished, even if it were 4am, and each harvester has four extinguishers.
Why was it that our premium isn’t lower?
His answer: “That’s great that you do that, but others don’t.”
This all leads to the common attitude of “Oh well, it doesn’t matter; it’s insured.”
Insurance seems to be a grudge purchase in agriculture, and some would suggest there is mistrust, or even a chasm at times, between the insurer and farmers in terms of understanding and communication.
The reality is that neither party wins if there is a claim, and it is in the interest of both to reduce the incidence of on-farm issues.
In December 2017, Farmers Mutual Limited (FML) was formed after two years of collaboration and consultation between farmers across Australia, industry groups and agricultural insurance experts.
It has been instigated by farmers for farmers, with a desire to take control of their risk management by pooling resources, sharing skills and engaging with other farm businesses to deliver products which add value to their businesses.
FML is a not-for-profit discretionary mutual fund with a foundation membership of farmers geographically spread across Australia.
It will focus on:
- Putting ownership and control back into farmers hands;
- Driving savings through operational efficiencies, removing intermediary and administrative costs;
- Profits retained by the mutual and owned by farmer members;
- Building a culture of risk management through an awareness that what is claimed today is paid for tomorrow;
- Remove the concept of community rating, where good businesses are subsidising poor risk managers;
- Initially marketing comparable protection products such as fire/hail and farm-pack, with the scope and capability to invest into tailored coverage;
- A dedicated product advisory committee which will be allocated its own R&D funding to investigate and establish alternative risk management solutions;
- Transparency, education, communication and collaboration.
FML has established a highly skilled and experienced board including six farming directors, spread nationally, with professional experience in operating collaborative projects and cooperatives, along with three independent directors with experience in insurance and discretionary mutual funds.
It will be administered by a management services company with appropriate licencing skills, experience, and relevant business track records.
Initially FML will be offering cropping fire/hail and general farm-pack protection, with a view to moulding these to better suit members’ needs, and the development of new products.
We have partnered with a major international commercial insurer, and both parties are excited about the prospect of working together for mutual benefit.
More information is available at www.fmlimited.com.au, and I would welcome any comments and/or expressions of interest from farmers who may wish to know more, or may be interested in becoming a member.