Boost for MPCI uptake
The uptake of multi-peril crop insurance is set for a major boost if Labor wins the forthcoming State election.
It is understood that stamp duty on MPCI will be scrapped as part of the party’s agriculture policy, due to be released before the state goes to the polls.
The speculation follows an election promise by the Nationals WA to push for MPCI products to be exempt of insurance duty for a period of three years.
MPCI policies, which cost between $15,000 and $20,000 per 1000ha of crop, cover loss of crop yields from all types of natural causes including drought, excessive moisture, freeze and disease.
Newer coverage options also combine yield protection and price protection to guard farmers against potential loss in revenue, whether due to low yields or changes in market price. The removal of stamp duty will save an average 2500ha broadacre farm about $5000 on a $50,000 policy.
WAFarmers president Tony York, who is only one of a handful of WA farmers to be covered by a policy, has advocated for Government support to encourage a higher take-up rate as part of the lobby group’s State Election Wish List.
He said a stamp duty exemption on MPCI would be “very encouraging for the grains industry”.
“We are hopeful that, if elected, a Labor commitment towards this will result in a greater uptake of MPCI policies,” he said.
Mr York said the State received duty on a small number of active policies. “For policies to become cheaper, the market needs to be stimulated so the underwriters can spread the risk across a larger number of policies,” he said.
“By fostering the uptake of the policies across the agricultural region, it reduces the reliance on concessional loans and leaves public funds available for better use, creating another revenue stream for the State by having it collect duties from a larger number of MPCI policies once the three-year concession period has concluded.
“WAFarmers continues to be a keen advocate for the uptake of MPCI policies in WA given agricultural businesses’ vulnerability to the effects of weather.”
Neridup farmer David Cox said the removal of stamp duty presented a significant saving for farmers and, if implemented, he would reconsider taking up a policy.
Mr Cox and his wife, Sally, run 10,000ha of mixed enterprise farms at Esperance and East Hyden.
“The spread of land goes some way to providing a form of insurance for my family, cattle and crop, so we are diversified in terms of our enterprises,” he said.
“Whenever there is a major disaster, subsequent dialogue reveals that farmers are under-insured.
“Currently in Esperance, insurance would be in the vicinity of 0.2 per cent of volume of the crop; MPCI has been forecast to cost up to 5 per cent of the crop value.
“So for a $2 million crop, it would cost the farm $40,000 in general insurance, $4000 in GST and $4400 in stamp duty. MPCI for a $2 million crop would be $100,000 for insurance, plus $10,000 GST and $11,000 in stamp duty.”
Mr Cox said insurance providers needed to make the products available more cost-effective.
“At the moment, insurance companies are keen to hedge their bets, with an all-in approach requiring people to cover crops and locations that may be less at risk of natural ‘disasters’, like frost,” he said.
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