Farmers are considering running the gauntlet and leaving machinery uninsured as premiums go through the roof.
Some farmers have told the ABC that insurance premiums have more than doubled in the past four years, and people are now paying insurance bills north of $100,000.
And the hip-pocket hit is two-fold because insurance premiums as a percentage of value have risen at the same time as the value of the items insured has gone through the roof.
Many farmers have machinery with a total value of millions of dollars, and individual items like combine harvesters can now be worth more than $1 million.
Farmers taking on greater risk
Ryan Milgate is a grain grower in western Victoria and a councillor with the Victorian Farmers Federation Grains Group.
He said a quick scan of his insurance bills from recent years highlighted a huge rise in premiums.
“Insurance bills have been rising for the past three or four years and, just looking at ours, we have more than doubled since pre-COVID levels,” he said.
“Certainly in our situation, the cost of new machinery has gone up and if you do have to replace it, the cost of that is significant, so we’re getting a double whammy.
“It wouldn’t be hard to find plenty of operations with insurance bills north of $100,000 and they’re not large corporate operations, just medium to large family farmers.
“And crop insurance could be another $100,000 on top of that.”
Mr Milgate said while insurance was a bank requirement for new equipment purchased on finance, some farmers were looking to cut their level of cover where they could.
“Certainly the smaller things, the older stuff you would normally have insured just in case, is dropping off,” he said.
“Depending on cash flow and equity and all that stuff, people are making decisions to take on greater risk than they would have been prepared to in the past.”
A nationwide issue
In New South Wales, farmers are facing a similar situation.
Rebecca Reardon is vice president of the NSW Farmers Association, and farms at Moree in the state’s north-west.
She said she would be looking at her own books to weigh up what to insure and what to leave out.
“We will be sitting down with our insurance broker and going through our items and taking off things like old sheds or self-insuring machinery,” Ms Reardon said.
“Talking to our broker, he said people are sitting down and saying, ‘What don’t I need if something happens to it?’
“We’re seeing that trend across the board in New South Wales.”
Ms Reardon said premiums would continue to grow.
“I think silos have doubled in price in the past five to seven years, sheds have doubled, we all know machinery has gone up enormously, so the replacement costs are very expensive,” she said.
Insurers blame erratic weather
The Insurance Council of Australia and the National Insurance Brokers Association declined to be interviewed by the ABC.
But in a statement, the Insurance Council said erratic weather was one of the reasons for the big jump in premiums.
“Wherever you live or work in Australia, whether you’re directly exposed to extreme weather impacts or not, premium prices are rising because of the escalating costs of natural disasters, the growing value of our assets making them more costly to replace, inflation driving up building and vehicle repair costs, and the increasing cost of capital for insurers,” a spokesperson said.
Queensland vegetable grower Shannon Moss has had crops impacted by drought, floods, and hail — all in the space of five years.
As the owner of Mulgowie Yowie Salads, Mr Moss grows watermelons, pumpkins, lettuce, and herbs in the Lockyer Valley.
After losing $200,000 worth of produce during flooding last month, he said crop insurance would not be worth getting given the frequency of these kinds of weather events.
“I imagine the crop insurance would be worth more than the crop,” he said.
“The worst flood here was Friday, May 13, 2022 — we lost a million dollars that day. This one [last month] was probably a $200,000 hit.”
Paying for the risks of others
Ryan Milgate said farmers were frustrated to hear that premiums were rising because of the impact of natural disasters in other areas when their own levels of risk had not changed.
“You don’t want to see anyone suffer any losses anywhere, but it’s pretty hard to swallow [if] on the Wimmera Plains, your insurance is going up because of flood impact on a major city in northern Australia.
“It is a bitter pill to swallow and get your head around.”
He said grain growers where he lived in western Victoria enjoyed a favourable run of seasons and were reasonably well positioned to pay insurance bills, but that could change.
“Much of our area has had a fairly fortunate run so, while it is a hugely increased burden, it’s still a burden that’s being handled — but at some stage, we will see drier years and that’s when it will become really top of mind,” Mr Milgate said.