Agricultural Risk Management: Lesson Learned from the Application of Rice Crop Insurance in Indonesia
Climate change has negative impacts on production of food crops, especially rice, the staple food for the majority of Indonesians. The Government of Indonesia has to manage the agricultural development to adapt to climate anomalies and protect farmers’ welfare. Agricultural insurance is introduced to share risks caused by perils and natural disasters. The pilot rice crop insurance has been successfully implemented in several rice-producing areas with positive responses from farmers. The sum insured by the indemnity-based insurance is six million Indonesian rupiah per hectare for one planting season, and the premium rate is set at 3 %. While 80 % of the premium is paid under the government subsidy scheme, the remaining 20 % is born by farmers themselves. Farmers who participate in this scheme are required to follow guideline on agricultural practices, while they are protected from crop damage caused by the named perils (flood, drought, pests, and disease). The partnership among the government as a regulator, insurance company as an insurer, and farmers as the insured needs to be further promoted to enhance the implementation of rice crop insurance.
KeywordsClimate change Indonesia Agriculture Rice Insurance Indemnity Premium Farmer protection
The rice crop insurance pilot study was conducted by the MoA in partnership with the State Ministry of State-owned Enterprises’ Fertilizers Companies during the 2012–2013 planting season. Since the 2013–2014 planting season, it has been implemented in collaboration with BAPPENAS under the support by “JICA Project of Capacity Development for Climate Change Strategies in Indonesia.” The authors’ gratitude is extended to the above organizations for the use of some materials. However, the content of this paper is under the authors’ responsibility and does not represent the views of the abovementioned institutions.
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