RICE CROP INSURANCE IMPLEMENTATION IN INDONESIA PRESENTATION ON THE 1 ST ALL PARTNERS G4INDO WORKSHOP LOR-IN HOTEL, SENTUL, BOGOR Thursday, 9 October 2014 1
OUTLINE 1. INTRODUCTION 2. IMPLEMENTATION IN 2013-2014 3. FEATURE OF RICE CROP INSURANCE 4. ASSOCIATED PROBLEMS 5. CONCLUSIONS AND WAY FORWARD 2
1. INTRODUCTION 3
1. BACKGROUND Food security is one of the primary development goals Rice production is considered as the national development priority Farmers are facing risk, specifically harvest failure due to severe calamity or pest and disease (P&D) infestation Insurance is introduced to the farmers for safe farming 4
1. Cont d Rice crop insurance to cover harvest failure due to: 1. Drought 2. Flood 3. Pest & Disease On the ground of: 1. Rice as staple food 2. Maintain area planted 3. Increase production for national stock 4. Farmer s financial support for working capital 5. Reduce import dependency 6. Save foreign payment 5
1. Cont d Agricultural insurance justification: (a) Farmer s satisfaction at farm field (b) Improve rice performance (c) Increase contribution to national stock (d) Reduce dependency on import Law No. 19/2013 as legal umbrella for agricultural insurance practices enabling: (a) Allocation of government budget and other relevant regulations (b) Implementation guideline 6
2. IMPLEMENTATION IN 2013-2014 7
Agricultural Insurance Pilot Study Locations in East Java Province 8
MAIN ACTIVITIES 1. Introduction and socialization of agricultural insurance/rice crop insurance 2. General implementation steps follow the set up mechanism 3. Information about premium rate: a. IDR 180,000/ha (about USD 15) b. Area coverage 1,500 ha in two rice producing regions c. Self-farmers premium payment IDR 36,000/ha 9
General Implementation Mechanism of Rice Crop Insurance Pilot Project HEAD OF REGIONAL OFFICES OF AGRICULTURE Area & Farmers Verification Extension Workers on Pest & Disease Self-farmer premium payment Policy issuance Claim payment 2 FARMERS/ FARMER S GROUPS (Insured) 1a JASINDO (Executing Insurer) 1b Insurance Personnel/ Agent Delivery & Distribution Administration Registration for insurance membership and loss adjustment 10
AREA SIZE: TARGET AND ACTUAL IN 2013 11
2. FEATURE OF RICE CROP INSURANCE 12
ATTRIBUTE AND FEATURE OF RICE CROP INSURANCE PILOT PROJECT Attribute The insured Insurance object Insurers Polis insurance policy Insurance period Indemnity value Rice Crop Insurance Feature Farmer s Groups, consisted by its members and considered as individual or anyone risk. Irrigated rice farm employed by the farmers (owner, producer) who are members of the Farmer s Group. PT. Asuransi Jasa Indonesia (Jasindo) as leader of an Insurance Pooling or Consortium. Insurance policy is issued for each Farmer s Group attaching its Schedule detain each and every insured farmers. Commencing from first day of rice planting, up to end day of harvest (approx. 4 months). Insurance cover however starts from day 11 from planting (10 days Time Excess). Rp 6.000.000,-/ha (for area less than 1 ha is calculated proportionately). 13
Insurance premium rate 3% rate or IDR 180.000,-/ha. Farmers pay 20% of IDR 36.000,-/ha as Self-farmer premium. JICA contribute the 80% or IDR 144.000,-/ha. Risks to cover 1. Flood 2. Drought 3. Named pests and diseases (local specific) Claim requirements Claim payment Cont d 1. Losses due to flood, drought, or pest and disease infestations. 2. Losses occur during the Insurance Policy period, and after the 10 day Time Excess. 3. Intensity of rice plant damage reaches 75% or above. 4. Such a damaged area reaches 75% of total area on each rice farm. 5. Inspection and Adjustment of loss carried out by Pest & Disease officers on behalf of farmers and a Loss Adjuster on behalf of Insurer. 6. The Adjustment constitutes a recommendation based on which Insurer decide the payable claims. Insurer to issue a Claim Confirmation. Claim payment is made by transfer within 15 working days to the Bank account of insured Farmers. 14
4. ASSOCIATED PROBLEMS 15
MAIN CONSTRAINTS 1. Agricultural insurance stakeholders, specifically the farmers require more frequency of socialization/sensitization and education to achieve certain level of understanding (for smoothing premium payment, claim handling and reporting procedures, etc) 2. Limited available budget at local level to intensify insurance socialization meetings and farmers gatherings. 16
4. Cont d 1. Small and marginal size and scattered of employed rice farm amid the constraints of agricultural infrastructures. 2. Expensive and costly delivery and distribution system on the part of the executing Insurers. 17
5. CONCLUSION AND WAY FORWARD 1. Farmers show their enthusiasm to participate in and become the insured farmers in the rice crop insurance program. 2. Good cooperation among the stakeholders, including offices of agriculture and Bappeda at regional levels is appreciated for which they expect the continuation of this crop insurance scheme. 18
5. Cont d 3. Firm commitment of Jasindo as the executing insurer of the rice crop insurance. 4. Communications to be intensified between farmers and field officers and agricultural office management, and ultimately also with the executing Insurer (Jasindo) 5. There is a growing need to use applied technology such as remote sensing to support crop insurance scheme as well as the introduction of other models of crop insurance 19
5. Future implementation plan: a. Scaling up the coverage area of the insurance scheme b. Subsidy target according to crops and regions 5. Cont d c. Risks are reoriented into index type direction different model of crop insurance d. Innovative systems are encouraged, such as distribution system improvement, government support, and the use of remote sensing technology 20
THANK YOU Sahat M. Pasaribu Agricultural Insurance Working Group and Agricultural Economist at the Indonesian Center for Agro-Socioeconomic and Policy Studies/ ICASEPS, Ministry of Agriculture Jalan A. Yani 70, Bogor 16161 sahatp@gmail.com 21