An Indian Farmer (source : Wikipedia)

Agricultural Insurance: Terms, Purpose, and Mechanism

Agricultural insurance is insurance that will cover the risk of loss in farming, raising livestock or fishing. So, agricultural insurance coverage is not only rice fields or gardens but also livestock and fishing.

What is the form of agricultural insurance coverage? If the farmer experiences a crop failure, then the farmer can file a claim. So, the losses suffered will be borne by the insurance company.

Agricultural insurance benefits and purposes

Agricultural insurance in Indonesia may not be as popular as life insurance and health insurance . In fact, it plays a very important role, you know, to anticipate the many risks in farming, such as erratic weather or pest attacks.

Not only farmers and breeders, this product is also suitable for those of you who want to start or even already have an agricultural and livestock business.

The field of farming is actually quite risky. The reason is, the results of agriculture rely on existing natural conditions. There could be erratic weather, drought, or landslides, and ecological changes that cause pest attacks.

In the end, farmers are forced to borrow money from middlemen. To pay for this, middlemen usually buy agricultural products at very cheap prices. This position is certainly detrimental to farmers and has an impact on the welfare of farmers which continues to decline. This is the reason why agricultural insurance is important.

Agricultural insurance benefits

For farmers, insuring their agricultural business provides many benefits. Not only financial benefits , but also non-material benefits. Anything?

1. Worry free

The basic principle of insurance is to make participants free from anxiety or anxiety if there are things that are considered detrimental to happen in the future. Same is the case with agricultural insurance. 

Having insurance, farmers will have certainty about compensation if there is crop failure, or natural disasters that damage production. 

By having insurance, farmers will avoid losses due to selling products cheaply to middlemen.

2. Promising compensation value

The compensation offered through the rice farming insurance program (AUTP) and cattle / buffalo business insurance (AUTS / K) is quite promising, you know . So farmers are more relieved if they experience losses due to crop failure. 

Through AUTP, the compensation offered is IDR 6 million per hectare with a coverage period of up to harvest (4 months) with a contribution amount of IDR 180 thousand per hectare. 

The government also provides a premium payment subsidy of Rp144 thousand and farmers only disturb Rp36 thousand.

According to the regulations, the claim policy will be obtained if the intensity of damage reaches 75 percent based on the natural plot area of ​​rice plants.

Meanwhile, the AUTS / K program guarantees livestock at a premium of Rp. 200 thousand per head per year. Of this figure, the government will bear Rp160 thousand and the remaining Rp40 thousand from independent farmers. Compensation paid reached IDR 10 million per head if dead and IDR 7 million per head if lost. 

3. Easy registration process, via online

Farmers are also facilitated in the agricultural insurance registration process. The government is working with insurance companies to release a digital platform that can help farmers register themselves. 

Registration of agricultural insurance participants can be done through a digital service called SIAP (Agricultural Insurance Information System). This online system makes it easier for farmers to join the AUTP and AUTS / K programs.

Agricultural insurance applied in Indonesia

In Indonesia, the government actually compiles an agricultural insurance program through the legal basis of the Regulation of the Minister of Agriculture of the Republic of Indonesia Number 40 / Permentan / SR.230 / 7/201. 

In the agricultural insurance law, the government subsidizes farmers to buy insurance with a special allocation of the State Budget (APBN).

The agricultural insurance subsidy program in Indonesia is run by the Directorate General of Infrastructure and Facilities (Dirjen PSP) of the Indonesian Ministry of Agriculture in collaboration with a state-owned insurance company, PT Jasa Asuransi Indonesia (Jasindo). So that participating farmers used to call it Jasindo agricultural insurance . 

In practice, Jasindo as the only provider of agricultural insurance in Indonesia will manage the claims and premium funds of the farmers. Apart from government programs, Jasindo also has several private insurance products for farmers.

Types of agricultural insurance in Indonesia

So, what kinds of agricultural insurance products are marketed by Jasindo in Indonesia? Here’s the review.

Rice Farming Business Insurance (AUTP)

AUTP or rice agricultural insurance is this insurance program from the government which targets rice farmers. This product protects farmers from the risk of crop failure due to flooding, drought, disease, and attack by plant pests. 

To get protection from AUTP, the fee to be paid is IDR 180 thousand. However, the government provides a subsidy of 80 percent so that farmers only need to pay IDR 36 thousand.

Now, because it is subsidized by the government, there are special requirements for farmers who want to register for this program, namely that they must have the status of smallholders or have a maximum land of two hectares. The land must also be irrigated or rainfed land close to water sources. 

The requirements for submitting a claim are that at least the rice plants are 10 planting days old (HST) or 30 days for the upland rice planting system and direct seed planting (tablea).

It should be noted, this insurance only covers land with a damage intensity of more than or equal to 75 percent in total with an area of ​​damage equal to or equal to 75 percent for each natural plot. The maximum amount of money that can be claimed is also limited, which is IDR 6 million per hectare. 

Cattle Livestock Business Insurance (AUTS)

AUTS is a government agricultural insurance program that targets cattle breeders. This product will protect cattle breeders from the risk of death due to calving, disease, accidents, or loss due to theft. 

However, there is a maximum coverage for claiming, which is IDR 10 million per cow. The compensation system is also regulated according to the sum insured minus the proceeds from the sale of meat (if the cow is forcibly slaughtered).

The requirements for registering this insurance are:

  • Prospective customers must be breeders or breeders and small scale breeders as regulated by law. 
  • Owned livestock must also be broodstock (female cattle) with a minimum age of 1 year, healthy, and have a clear identity (can be eartag, burn stamp, livestock card, etc.).
  • The premium cost for obtaining AUTS insurance is Rp. 200 thousand, but the government provides an 80 percent subsidy so farmers only need to pay Rp. 40 thousand.

Fisherman Farm Insurance

Fishermen insurance or fishermen’s agriculture aims to protect fishermen from the risk of death while fishing or outside these activities. Interestingly, the government pays 100 percent of the insurance fee, which is IDR 175 thousand.

The requirements for getting this insurance include:

  • Have a valid fishing card.
  • Have a savings account, or you can also make a statement of ability to have a savings account.
  • Using fishing vessels with a maximum size of 10 Gross Tonnage (GT)
  • Maximum age 65 years.

Non Government Program Insurance

Apart from the three government programs above, Jasindo’s agricultural insurance also offers private products that target agricultural business actors, financial institutions, or farmers. The following products are available:

  • Rice Farmers Business Insurance
  • Cattle Livestock Business Insurance
  • Corn Farmers Business Insurance
  • Independent Fisherman Insurance

To register, Jasindo and the Ministry of Agriculture have actually published online services through the Agricultural Insurance Information System (SIAP).

How do I register for agricultural insurance?

To get agricultural insurance with subsidies from the government, the following steps must be taken:

  • Participate in data collection conducted by the Regency or City Office. 
  • Data sent to the Ministry of Agriculture.
  • Farmers fill out registration forms as potential insurance participants. The available data is then verified by the government.
  • After the data is verified, the farmers then meet with insurance companies.
  • Then the government will hold outreach on premium payment and insurance risk selection. 
  • After the policy is issued, farmers can submit claims in case of crop failure.
  • Calculation of premiums and payment schemes
  • Life insurance

If it is already registered, then farmers, breeders or fishermen need to understand how to pay and the amount of the premium. That way, if there is an unwanted risk, coverage will be accepted.

Premium calculation simulation

In order to be clearer in calculating the cost of this insurance, let’s look at the simulation calculations reported by the Ministry of Agriculture below.

Production cost per planting season: IDR 6 million

Insurance premium: 3 percent of production costs

3/100 x IDR 6 million = IDR 180 thousand / 1 hectare (ha)

The government subsidizes 80 percent, so it only pays 20 percent

20/100 x Rp180 thousand = Rp. 36 thousand / 1 hectare (ha)

Premium paid by farmers:

  • Premium per 2 ha = IDR 72 thousand
  • Premium per 1 ha = IDR 36 thousand
  • Premium per ½ ha = IDR 18 thousand
  • Premium per ¼ ha = IDR 9 thousand

Agricultural insurance premium schemes

Apart from government programs, there are several other ways to pay for this one insurance premium, including:

1. Self-payment

If you choose this scheme, farmers must pay the full premium offered without assistance from other parties.

2. Partnership payments

Through partnership payments, farmers will be assisted by a partnership company in paying premiums. However, of course there are certain agreements that are agreed by both parties.

3. Payment of credit patterns

Premium payment using a credit pattern is a payment that is adjusted to the credit that is being taken by the farmer.

Thus information about agricultural insurance. For information, the government plans to make this product a requirement for applying for a People’s Business Credit (KUR), you know! KUR itself will help develop their business because there is additional capital from low-interest loans.

Come on, learn about it and if you have a family or acquaintance who works as a farmer, you can share this with them. Hopefully this is useful!

Leave a Comment

Your email address will not be published.