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With farming sectors across Australia feeling the financial pressure, many agriculturalists are battling climbing costs in insurance premiums, a challenge compounded by higher asset values and dramatic climate events.
The reality for producers is stark: Farm insurance expenses have surged, more than doubling within a four-year timespan, thrusting annual premiums well beyond the $100,000 mark for some. These rising costs are turning into a substantial financial burden, forcing farmers to reconsider their insurance strategies.
The agricultural community faces a dilemma as equipment and infrastructure values inflate alongside heightened insurance rates, which affects standard farming assets like high-end combine harvesters, now priced at over a million dollars each.
Ryan Milgate, grain grower and advocate for the Victorian Farmers Federation, observed a troubling uptrend in the cost of safeguarding essential farming machinery.
"Our insurance bills have gone up significantly, particularly post-COVID-19. We're seeing a surge driven not just by an increase in premiums but because the assets themselves have become costlier to replace," shared Milgate.
Within this fiscal strain lies an increased propensity for risk-taking. Farmers, particularly those who are not obliged by lenders to maintain comprehensive coverage for financed purchases, might opt to either partially insure their assets or even forgo certain insurance policies.
This shift is not confined to Victoria. Instances resonate nationwide, as reflected in the experiences of NSW Farmers Association's vice president Rebecca Reardon, who will be scrutinizing insurance renewals with a critical eye, trimming unavoidable excess from her farm's expenses.
While customers tighten their belts, insurers justify the steeper costs by pointing to the more venal aspects of the weather. Increased volatility brought about by climatic aberrations plays a prominent role in redefining premium calculations.
An example of the struggle against extreme weather is demonstrated by Queensland's Shannon Moss, whose farming business has been struck by droughts, floods, and hail within five years. For him, the feasibility of crop insurance is overshadowed by the sheer frequency of crop-damaging events.
Moss recently contended with a major financial loss, reflecting on a particularly devastating flood: "Just last month, we took a bruising hit, costing us almost a quarter-million dollars in lost produce-mostly immediate harvest-ready crops," recounted the Lockyer Valley grower.
An added source of discontent among farmers like Milgate is the rising premiums due to catastrophic events in regions far removed from their spheres of operation, impassioned by the need for an insurance system sensitive to local risk profiles.
Differentiating between high and low-risk farming areas could become an increasing topic of discussion. "Some have been lucky with favorable seasons-insurances are being met now. Yet in the face of harsher times, such increases will be much harder to manage," expressed Milgate, hinting at the broader implications for the industry should conditions turn dire.
Published:Saturday, 10th Feb 2024 Source: Paige Estritori
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Knowledgebase
Term Life Insurance: A life insurance that provides a cover for a specific period of time - usually one to five years or until the insured reaches age 65 or 70.
