14. 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.