The Federal Government refused six years ago to fund an insurance scheme to protect crops against natural disasters after a study showed taxpayers would have to subsidise premiums by 25%.

A steering committee was set up in 2000 to examine the feasibility of establishing a multi-peril crop insurance (MPCI) scheme to be headed by then Federal Agriculture Minister Warren Truss.

The committee included the Grains Council of Australia, the Farmers Federation, representatives of federal and state agriculture departments and major insurers and reinsurers.

Accounting firm Ernst & Young conducted market research as part of a feasibility study into the MPCI that showed only 18% of farmers were likely to take up the product as it was proposed.

The report said it would cost the Federal Government $1.7 million to set up an MPCI scheme and an additional $5 million a year to operate it.

This was based on covering only grain crops and did not take into account crops like bananas, closely grouped in one region and therefore with high levels of exposure to natural disasters.

After considering the final report, Mr Truss advised the steering committee in early January 2001 that the report “raises serious doubts about the commercial viability of MPCI in Australia” and the steering committee was disbanded.

Insurance Council of Australia spokesman Rod Frail told Sunrise Exchange News that farmers and insurers weren’t keen on a compulsory crop scheme.

“Farmers would not support a compulsory scheme and were not keen to forego exceptional circumstance relief payments from the Government, therefore providing less incentive to take up insurance,” he said. “Insurers were concerned about the lack of data on potential losses.”