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Helping farmers and agribusiness with a new and improved way forward

The Centre for Applied Climate Sciences’ Prof Shahbaz Mushtaq is applying his expertise in agricultural economics to assist primary producers when they can’t adapt to or manage the climate. His team is focused on developing insurance products and other financial mechanisms so growers can transfer the risk.

'Not all risk is manageable. At some point there is a limit to adaptation; when it is no longer economically viable then you need to transfer the risk elsewhere.'
Prof Shahbaz Mushtaq

Insuring against climate sounds tricky but UniSQ is on track to help.
The main insurance product available to Australian producers has been multi-peril crop insurance. Under this kind of policy, crops are covered for a range of damage such as drought, excessive rainfall, wind, wildlife under a single policy. Prof Mushtaq’s research found no multi-peril crop insurance was taken out in Australia in 2020.

“It is expensive, and it requires a visit from an assessor if you put in a claim which could take weeks to finalise if the assessor and farmer agree on the damage. If not, it can be a very protracted and unpleasant process,” he said

UniSQ’s Centre for Applied Climate Sciences is researching and developing indexed insurance products and industry initiatives like “mutuals” to assist farmers to manage climate related risk. Indexed insurance gives the farmer a choice in what they are insuring against and to what degree.

“The index could be based on rainfall, soil moisture or temperature depending on which factor is of most risk to the operation. The payout trigger would be set and immediate - no need for an assessor which is usually 30 - 40% of the cost,” Dr Mushtaq explained.

Under an indexed based insurance product, the farmer could set an indexed threshold of 50mm of rain total for January and February. If their nearest and suitable Bureau of Meteorology weather station only recorded 35mm for those months the payout would be immediately triggered, no questions asked.

“This also means a grower who mitigates against weather and climate risk by adapting their on-farm practices can take more calculated risks knowing the indexed insurance will be their safety net,” Dr Mushtaq said.
The Drought and Climate Adaptation Program (DCAP) has engaged with a number of industries through the Queensland Farmers’ Federation including cotton, macadamias, meat, sweet corn and chili. Their work with the sugar industry has resulted in steps toward the creation of an industry cooperative cyclone mutual.

Under this model, industry representative body Canegrowers will set up a mutual fund that growers buy into by paying a premium. When a tropical cyclone strikes all members within 100km of the cyclone path who joined the mutual get a payout - if there aren’t enough contributions to cover the damage, insurance pays the rest.

“It will allow the whole sugar industry to become more resilient and reduce the need for the government bail out packages when disaster strikes,” he said.

Creating the products or mechanism is the first step, the next vital step is to encourage primary producers to use them.

“There will need to be a culture shift in the industry because the more take up, the more suitable the insurance and the cheaper it will be for everyone,” he explained

UniSQ’s Centre for Applied Climate Sciences expects the first of its initiatives to be available for primary producers by 2021.

Working together

The Queensland Farmers’ Federation calls its work on insurance with UniSQ “collaboration at its best”.

Kerry Battersby, Project Manager at QFF, explains they recognised a critical need for a different way of looking at insurance after recurring natural disasters in Queensland.

“Insurance can be unattractive, or farmers have had really bad experiences with insurance agents, so it’s important to hear these experiences and also show farmers a new and improved way of managing financial risk,” Kerry Battersby said.

Farming without risk. The new insurance possibilities.

Imagine getting an insurance payout if you didn’t get your annual expected rainfall. It seems an idyllic, yet perhaps expensive solution to modern farming.

Join Professor Shahbaz Mushtaq and Jayne Cuddihy from 'There's an Elephant in my Paddock!' as they talk climate insurance.

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