Harvester owners and insurers have been in discussions this week to reach a solution to a critical situation around availability of insurance for headers.
The high incidence of fires throughout the past summer’s harvest has led to Lloyds of London, the ultimate provider of finance to most of Australia’s insurance companies, issuing instructions to the industry that insuring harvesters “is not a good business to be in”, said Australian Custom Harvesters Association executive officer, Trevor Verlin.
“It’s a bit like betting, even bookmakers like to lay off their bets to someone else,” he said, by way of explaining the role Lloyds plays in the Australian financial landscape.
The spate of fires throughout the past season’s harvest attracted the attention of insurers. While there is no central body that keeps a tally of harvester write offs, the association believes there may have been as many as 40 in the past 12 months.
I’d like to understand (insurers’) rationale behind the move, it’s not like a sudden discovery that harvesters catch fire.
- Ian Langridge, Goolgowi
“This is not a new problem,” said Mr Verlin, “harvesters catch fire and burn down every year, it just seems this year there were more than most.”
The biggest problem crops are legumes, specifically lentils and chickpeas. Growers may well find themselves forking out extra to harvest the lucrative crops this year.
“The trash associated with chickpeas has volatile oils in it and tend to gather in spots on the machine,” said Mr Verlin.
Lloyds Australia has played down the claims, saying Lloyds is a “marketplace” of 56 separate insurance businesses and “each business makes their own underwriting decisions, and it may be that one or more have made a decision to cease insuring harvesters, but there is certainly no mandate to this effect coming from the Corporation of Lloyd’s”.
Harvester contractor Ian Langridge, Goolgowi, (pictured on our cover) said insurance premiums could now be as much as $8000 for one of the machines, which can cost $800,000 to buy and set up. Mr Langridge said harvesting contractors would not be able to absorb such costs without increasing their rates.
“The insurance component of running costs is not insignificant,” he said, “if they double premiums, that would certainly increase its significance. I’d like to understand (insurers’) rationale behind the move, it’s not like a sudden discovery that harvesters catch fire.”
Mr Langridge, who has been operating harvesters for more than 26 years, said there were a number of processes to mitigate the chances of a harvester catching fire. Among them was the practice of blowing down the machines regularly to stop trash build up.
Yenda harvester owner and an Australian Custom Harvesters Association representative Rod Gribble said harvester owners need to sit down with the insurance companies and discuss the issue of the major underwriters’ goal of reducing their risk to nil.
He said this season presented its own particular problems in that chickpeas didn’t have rain on them close to harvest to wash them down, and record temperatures didn’t help matters either.
“But machine hygiene is one of the major keys to stopping fires.” He said blowing the machine down properly took 15 to 20 minutes, and depending on conditions, it was sometimes a necessary job each hour. “And that’s where it can take a significant proportion of your productivity,” he said.
“The days of 1985 rates are over, everything else has gone up, they’re a vital tool and these machines are expensive to own and operate.”
Mr Gribble said increased operating costs must be borne.
“The cost of ownership is well more than $700,000 by the time you’re set up and you need commensurate money back,” he said.
“But the end of the world is not tomorrow.”
Mr Gribble’s sentiments were echoed by Mr Verlin.
“All Lloyds has done is shown us there is a problem and a paradigm shift is going to take place,” Mr Verlin said.
He said there were “probably 150” professional contractors operating in Australia, who were responsible for harvesting 25 to 30 per cent of the nation’s crop.
The Bureau of Statistics estimates in 2015, crops taken from the paddock by harvesters amounted to 1.5pc of Australia’s gross domestic product.
Total GDP for that year was estimated by Trading Economics at about $1.3 trillion.
Mr Verlin said the current insurance predicament was a chance for the industry “to look at how we do things”.
He suggested charges based on engine-hour or rotor-hour rates.
“Stopping and blowing down the machine must be reflected in the job price,” he said.
“It’s a good opportunity to modernise another aspect of the industry. For too long prices have been too low,” he said.
And Mr Gribble agreed. “We need skilled staff, you can’t just have a heartbeat on the seat anymore,” he said.
“Operators need to know the grass fire index, they need to take readings in the paddock and know how to interpret them.”
Australian Small Business and Family Enterprise Ombudsman Kate Carnell said her office was aware of the issue and was monitoring it closely. “(This) certainly has the potential to create serious problems for small businesses and family enterprises across the agricultural sector,” she said.
“We’re currently looking into the matter and will endeavour to make any representations deemed appropriate in helping support those who may be affected.”