As many of the world’s poor households are living in environments where risk is a daily reality. agricultural insurance is re-emerging as a topic of interest to farmers, policy makers, insurance companies, and development finance institutions. If we can overview of agricultural insurance in selected developed and developing economies then it is observed that the selected countries gives crop and livestock insurance with and without subsidies from the governments. There are seven identified developed economies that do not give subsidies in their agriculture insurance namely Australia, Germany, Greece, Hungary, New Zealand, Sweden, and The Netherlands. However, many developed economies also give subsidies to their insurance program, notably the USA, Canada, Austria, and Switzerland among others. Let’s take a overview on agriculture insurance development of worldwide countries.
Historically, the agriculture insurance in Australia is considerably old as it was established in 1918 and is considered to be every well developed and very competitive. Named peril insurance products are common in Australia, with a number of companies providing insurance against hail, frost and fire risks. Significant expansion of the program began only in the year 1960. In 1974–75 West farmers and Western Underwriters offered an area yield guarantee scheme for Western Australian growers. Growers could also nominate cover for less than the 75 per cent of average shire yield at a reduced premium. The scheme suffered from poor take-up by farmers and had insufficient reliable individual farm data on which to base premiums. As a result, the scheme suffered badly from adverse selection with farmers who never made 75 per cent of the yield average keen to take on the scheme. While other farmers who never fell below this level had no incentive to take up the scheme.
In 1999 to 2000, there were more insurance products offered by Growers’ cooperative CBH and insurer AON. One of these is the crop failure insurance that provided for a nominated value per hectare that represented the cost of replanting the crop the following season. Another is the sprouting downgrade insurance that covered the downgrading of grains due to the sprouting of grains in the heads caused by wet weather prior to harvest. In this case, farmers were paid the difference in value between the intended grade of delivery and the grade it was eventually accepted into. In the early 2000 weather derivatives were introduced to Australian farmers. This is based on rainfall and temperatures at weather stations across the country. Another innovation in Australia’s insurance is the YieldShield. This is a relatively new product offered by Primacy Underwriting Agency starting in 2009 up to present. Yieldshield combines traditional named peril insurance for hail and fire insurance with yield index insurance that covers against insufficient or excessive rainfall water stress for wheat and grain sorghum. YieldShield’s water stress insurance attempts to overcome the problem of a lack of farm-level yield data by utilizing crop simulation models to estimate farm level yield. Another insurance scheme which was based on the cost of production cover was also introduced in April 2011.This is a trial mutual fund scheme for wheat and barley growers in Western Australia. This scheme allowed participating growers to cover their production costs if their yield fell below pre-specified levels. This was intended to cover growers against natural events including drought, frost, hail, flood and fire risks. Another notable development in Australia’s agricultural insurance is the CelsiusPro Australia which started operations in 2012 until at present. The company specializes in structuring and originating weather derivatives. CelsiusPro’s weather derivatives are based on a weather index derived from measurements at several hundred official Bureau of Meteorology weather stations across Australia. A wide variety of certificates are available for agriculture. The major advantage of the weather certificates is that claims do not need to be assessed. Once the event occurs there is an automatic pay out based on the data received from Bureau of Meteorology (BOM). The data is independently sourced from the BOM who is the arbitrator in any dispute. Weather basis risk can occur between stations which need to be noted by the person looking at these types of strategies. CelsiusPro Australia suggested the government could play a role in the construction of more weather stations to reduce basis risk. Some of the private insurance companies that operate in Australia are Rural Affinity and Western Australian (WA) which has been working closely with Australian Reliance in providing insurance products to farmers. Rural Affinity is owned jointly by Corion (a fully owned subsidiary of the Munich Reinsurance Company) and the executive directors of the business. Rural Affinity is a specialist agricultural insurance agency providing products to the crop, plantation timber and livestock industries in Australia and New Zealand. The specific products are Livestock, Olive and Nut Crop, Plantation Timber Australia and New Zealand, Cotton, Farm Pack, Viticulture, Small Farm and Fruiting Trees. The Australian Reliance is a Western Australian owned and operated Insurance Broker. Some of the services offered by Western Australian are a) Multi-peril Crop Insurance (Cropsure) – this policy protects the farmers from financial loss as a result of weather events, disease and insect pest infestation. Unlike other insurances that protects against loss of income. Cropsure provides cover for operating costs including, but not limited to seed, fertilizer, chemicals, field operations, fuel, freight inwards and contract costs. b) A Complete Package – the package also includes: Traditional Crop Insurance including Fire and Hail, Farm Insurance, Motor Vehicle, Home Building Contents, Credit Insurance, Life Insurance. Australia’s delivery channels are through brokers who are considered the most important in the delivery channel. Producer associations, cooperatives and banks are crucial in the linkages between the farmers and the insurers. Crop and livestock insurance is voluntary as there is no form of public support for agricultural insurance in this country.
The National Rural Advisory Council(NRAC) Australia in its assessment 2012 report puts an emphasis the role of government to assist Australian agricultural industries to become more self-sufficient and better at managing weather related impacts on production through providing better and more standardized data.
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