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Government Vision in Food Security
Food security is a top priority in Indonesia’s national development agenda. In the era of President Prabowo Subianto’s administration, the food security program was not only focused on increasing production, but also strengthening protection for agricultural sector actors. With increasingly complex global challenges such as the climate crisis, geopolitical disruption and volatility in world food prices, the government realizes that the agricultural sector must be strengthened in terms of risk management and financing.
In Prabowo-Gibran’s vision, food estate development, agricultural modernization and food independence are strategic priorities. However, the success of these programs will depend greatly on the extent to which the government is able to provide guaranteed protection for farmers, both in terms of weather, disasters and markets. This is where the role of agricultural insurance becomes very crucial.
Agricultural insurance not only protects farmers from the risk of crop failure or economic loss, but also encourages the sustainability of farming businesses and creates a sense of security in production. Risk protection through insurance is a policy tool that is able to stabilize farmers’ income and maintain national food supplies in the long term.
This article will discuss in depth the understanding, development, challenges and strategies for strengthening agricultural insurance in the Prabowo era, including how local governments and the private sector can work together to build a strong and sustainable food protection system.
Definition and Function of Agricultural Insurance
Agricultural insurance is a form of financial protection specifically designed to transfer the risks faced by farmers to insurance companies. These risks include crop failure due to extreme weather, pest attacks, plant diseases, and natural disasters such as floods, droughts, or landslides. The main aim of agricultural insurance is to provide a guaranteed minimum income to farmers so that they still have capital to continue their farming business, even if they experience losses due to uncontrollable risks.
In the context of national food security, the function of agricultural insurance is not only limited to providing compensation for losses, but also as a tool for economic and social stabilization. With risk protection, farmers are encouraged to continue planting, even amidst the threat of uncertain weather. This is very important to maintain continuity of food production, especially strategic commodities such as rice, corn, soybeans and horticulture.
Agricultural insurance also has an educational function. In the process, farmers began to be invited to understand the importance of risk identification, recording farming operations, and more structured financial planning. This opens up opportunities to increase farmers’ financial literacy and strengthen their relationships with other financial institutions, such as banks and cooperatives.
Operationally, agricultural insurance can be conventional or parametric (weather index). In conventional insurance, claims are paid after verification of losses is carried out in the field. Meanwhile, in parametric insurance, claim payments are based on certain parameters, for example rainfall recorded in the area, so the claims process is faster and more efficient.
With climate challenges and disasters increasing every year, agricultural insurance is an important instrument that must be prioritized in national food policy. Without guarantees of adequate risk protection, farmers will continue to be in a cycle of vulnerability and uncertainty, which ultimately threatens the success of the food security program itself.
Evolution of Agricultural Insurance in Indonesia (Jokowi to Prabowo)
Agricultural insurance in Indonesia is nothing new, but its journey has experienced many challenges and developments over time. The agricultural insurance program was first initiated nationally during the administration of President Susilo Bambang Yudhoyono through a limited trial. However, a more serious and structured implementation only started in the era of President Joko Widodo (Jokowi), especially since 2015 with the launch of Rice Farming Business Insurance (AUTP).
The AUTP program is subsidized by the government through the Ministry of Agriculture as an effort to provide protection against the risk of crop failure due to natural disasters, attacks by plant pests (OPT), and disease. The initial target of this program is 1 million hectares of rice fields per year, and in practice, the AUTP premium of IDR 180,000 per hectare is subsidized up to 80% by the government. Besides AUTP, then Cattle Business Insurance (AUTS) and fisheries insurance were also developed.
However, for almost a decade of implementation, agricultural insurance in the Jokowi era still faces a number of obstacles such as low levels of farmer participation, minimal outreach, limited data, and a complicated and time-consuming claims process. This causes many farmers to not be interested in participating even though it is subsidized.
Entering the era of President Prabowo Subianto, hopes for the revitalization and expansion of the agricultural insurance program are increasingly high. The new government is committed to increasing national food independence, one of which is through food estate programs in various regions. In this context, the existence of agricultural insurance becomes more important than before as a large-scale risk mitigation tool.
It is projected that the Prabowo government will encourage digitalization and efficiency in the implementation of agricultural insurance. The use of technology such as satellite data, land information systems, and mobile applications for registration and claims is expected to increase farmer participation and program effectiveness. In addition, collaboration with the private sector, insurance brokers and agricultural fintech will be key in expanding coverage and improving existing systems.
With strong political support and a data and technology-based approach, the Prabowo era has the potential to become a momentum for the revival of agricultural insurance in Indonesia as the main foundation for long-term food security.
Premium Subsidy Scheme and the Role of Regional Government
One of the key elements in the development of agricultural insurance in Indonesia is the premium subsidy scheme provided by the government. Without subsidies, most farmers, especially small farmers, are unable to pay premiums in full due to limited income and lack of understanding of the benefits of insurance.
In the Rice Farming Business Insurance program (AUTP), the central government covers around 80% of the total premium, so farmers only need to pay IDR 36,000 per hectare per planting season out of a total premium of IDR 180,000. This scheme has proven capable of encouraging increased farmer participation, especially when the registration and data collection process is carried out collectively through farmer groups. However, unfortunately, the amount of insured land coverage is still far from the national target due to budget and resource limitations.
This is where the role of local government becomes very important. Provincial and district/city governments can play an active role by adding additional subsidies from the APBD, facilitating outreach, and strengthening the capacity of agricultural extension workers to accompany the insurance implementation process. Several regions such as West Java, Central Java and West Sumatra have shown initiative by allocating regional budgets to expand insurance coverage for their farmers.
Apart from subsidies, regional governments can also form special work units under the agricultural department to collect data on potential risks in their respective regions, map vulnerable land, and establish partnerships with insurance companies and brokers. By understanding the character of local risks, insurance product designs can be adjusted so that they are more relevant and desirable.
No less important is the role of local governments in integrating agricultural insurance programs with other assistance programs, such as assistance with seeds, fertilizer and agricultural machinery (alsintan). With good integration, program effectiveness will increase and farmers’ trust in the government will grow.
Therefore, if agricultural insurance is to become one of the main pillars of national food security, then synergy between the central and regional governments in terms of financing, data collection and technical implementation is a must.
The Important Role of Insurance Brokers
Role insurance broker like L&G Insurance Broker is very important in bridging the need for risk protection in the agricultural sector with appropriate and scalable solutions. As an independent party representing customer interests, L&G helps farmers, cooperatives and government agencies in choosing insurance products that suit their risk profile.
L&G also provides education about the importance of risk management, assists with the insurance application process, and assists claims so that they run quickly and fairly. With the support of digital systems such as LIGASYS and long experience in the national insurance sector, L&G is able to design comprehensive solutions, including more efficient weather index-based or parametric insurance.
This consultative and technical role is very crucial, especially to expand farmers’ access to risk protection, increase financial literacy, and strengthen the success of national food security programs through a professional, sustainable and community interest-oriented approach.
Literacy Challenges and Outreach to Farmers
Even though the agricultural insurance program has been rolled out for several years, the level of farmer participation is still relatively low. One of the main causes is the lack of insurance literacy and understanding of risk management concepts among farmers. Many farmers still think that insurance is an expensive, complicated product, and only benefits the insurance company, not them as participants.
Most farmers in Indonesia, especially small and traditional farmers, are not yet familiar with a formal risk protection system. They rely more on informal methods such as mutual cooperation or loans from relatives when they experience losses due to crop failure. On the other hand, limited access to insurance information and education also means that they do not know that premiums can be subsidized and claims can be disbursed quickly if procedures are fulfilled.
This condition is exacerbated by the lack of intensity of socialization from related parties. So far, outreach has tended to be formal and limited to official events, without a more inclusive and sustainable community-based approach. In fact, an outreach strategy that is locally based, uses regional languages, approaches community leaders, and is based on testimonials from participating farmers who have experienced benefits, has proven to be more effective in building trust.
This is where the role of agricultural extension workers becomes very vital. They are at the forefront in explaining insurance benefits, assisting with the registration process, and facilitating claims. Unfortunately, the ratio of the number of active extension workers to the number of farmers is still very unequal. Apart from that, the use of digital media is also not optimal, even though many young farmers are now starting to actively use smartphones and social media.
To increase farmer participation, a massive, systematic and sustainable literacy campaign is needed. The involvement of educational institutions, farmer cooperatives, and insurance brokers such as L&G Insurance Brokers is very important in this matter. Brokers can be educational as well as technical liaisons in explaining insurance schemes in simple and easy to understand language.
Without improvements in literacy and communication, agricultural insurance programs will find it difficult to reach millions of Indonesian farmers who should be protected.
Economic and Social Impact Analysis
Agricultural insurance is not only a financial protection tool for farmers, but also has a broad impact on the economic and social stability of rural communities. When farmers experience crop failure without insurance protection, they tend to fall into debt, lose business capital, and experience a decline in welfare which leads to structural poverty. This condition has a direct impact on social inequality and regional economic resilience.
On the other hand, with insurance protection, farmers have a guarantee of business continuity, even in extreme situations. They can return to planting the following season without having to start from scratch. The positive domino effect of this scheme is maintaining local food supplies, price stability in the market, and increasing farmers’ purchasing power.
From the government’s side, the existence of an agricultural insurance program can reduce the burden on the social budget. Instead of providing post-disaster emergency assistance, the government can direct the budget to premium subsidies and more proactive strengthening of the food security system. With an effective risk transfer system, the APBN and APBD become more efficient and measurable.
At the social level, agricultural insurance also forms an ecosystem that supports the growth of farmers’ self-confidence and entrepreneurial spirit. Farmers are no longer passive or speculative regarding weather and markets. They start to think long term, open up derivative business opportunities, and dare to take innovations because they feel more financially secure.
Apart from that, the positive impact is also felt by financial institutions. With risk protection from insurance, banks and cooperatives have more confidence in extending credit to farmers. The risk of default can be minimized, and access to capital becomes wider. This paves the way towards financial inclusion in the agricultural sector, which has so far remained very low.
Overall, agricultural insurance has a significant economic and social impact – not just for farmers, but also for wider society and national stability.
Conclusions and Progressive Policy Suggestions
Agricultural insurance is a strategic instrument in supporting the National Food Security Program, especially amidst increasing risks due to climate change and global dynamics. In the era of President Prabowo’s administration, great hopes are placed on increasing national agricultural production capacity. However, without adequate risk protection, this program is prone to failure due to the high potential for losses at the farmer level.
The government needs to make agricultural insurance an integral part of food policy, not just an additional program. Premium subsidies must be expanded and supplemented with support from local governments. Literacy and education must be strengthened, by involving extension workers, cooperatives, and private partners such as insurance brokers and financial institutions.
The use of digital technology, satellite data and weather index systems must be optimized to create an efficient, transparent and fast insurance system. Regulations must also be directed at encouraging multi-sector collaboration that strengthens overall farmer protection schemes.
With a progressive and integrated approach, agricultural insurance is not only a risk shield, but also the foundation for independence and sustainability of Indonesia’s food security in the future.
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