Managing Operational Risks in Palm Oil Plantations: From Seeding to Harvest, the Important Role of Insurance and Professional Brokers

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On this occasion, we will discuss in depth operational risks in the palm oil industry – a vital sector which is the backbone of the national economy and is also a government development priority. From seeding to harvest, each stage in the oil palm plantation cycle has unique risks that need to be managed appropriately.

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Initial Risks 

The seeding, maintenance and harvest stages are productive and dynamic phases in the oil palm plantation industry cycle. This is where economic value begins to be created, but at the same time various technical and operational risks emerge that can hamper productivity or even cause major losses. Starting from extreme weather, pests and diseases, to work accidents — everything must be anticipated carefully.

Solid risk management and appropriate insurance coverage are the main foundations for maintaining operational continuity and sustainability. In this case, the role of insurance brokers becomes very crucial. Brokers not only connect companies with insurance providers, but also design protection strategies that are appropriate to conditions in the field, including managing palm oil plantation risks.

This article will thoroughly examine the risks that arise at this stage, the type of insurance needed, and how L&G Insurance Broker can be a reliable strategic partner in facing these challenges.

Palm Oil Plantation Operational Risks: Weather, Pests, Labor, and Heavy Equipment

The operational stage in the palm oil industry is the heart of the entire production process — from seeding, planting, plant maintenance, to harvesting and transporting Fresh Fruit Bunches (FFB). It is at this stage that operational costs increase sharply, and the risk of loss of output or disruption of productivity becomes very real. Here are some of the main risks that are often faced:

1. Extreme Weather and Climate Change

Global climate change has a major impact on palm oil productivity. Heavy rainfall causes flooding and erosion, while drought slows plant growth and reduces crop yields.

Flood risk: Damages seedlings in nurseries, kills young plants, and makes mobility of heavy equipment and workers difficult.

Extreme drought: Causes plant stress, increased pest attacks, and decreased oil yield.

Role of insurance: In some countries, weather index insurance or crop insurance is available. In Indonesia, this risk protection is still developing and requires the role of brokers such as L&G to bridge with insurance companies that have technology-based solutions.

2. Pest and Plant Disease Attacks

Palm oil is very susceptible to attacks by ganoderma (white root fungus), fireworms, mice and various types of leaf-sucking pests. If not controlled early, the damage can spread to the entire garden block.

Impact: Decreased tree productivity, death of young plants, and increased control costs.

Need: Pest control SOPs that are integrated with technology-based monitoring.

Broker’s role: Insurance brokers help identify whether there are agricultural insurance products that can cover biological risks, as well as propose data-based mitigation strategies as part of a risk engineering approach.

3. Labor Risk: Accidents and Productivity

Palm oil plantations employ thousands of workers, many of whom work in harsh and high-risk environments, such as:

1. Harvesting activities using sharp tools in the midst of extreme weather
2. Transportation of FFB uses three-wheeled vehicles or tractors
3. Fertilizer and pesticide spraying activities

Main risks:

1. Physical injury
2. Work accident
3. Exposure to hazardous chemicals

Insurance Solutions:

1. Work accident insurance (JKK)
2. Group life insurance
3. Health insurance for permanent and daily employees

The role of a broker like L&G:

Help design work risk-based employee insurance programs, combining private insurance with BPJS Employment for comprehensive and cost-efficient protection.

4. Damage to Heavy Equipment and Operational Vehicles

Heavy equipment such as tractors, mini loaders, sprayers and FFB transport trucks play an important role in plantation efficiency. However, rough terrain and intensive use increase the risk of damage and accidents.

1. Risks: Equipment downtime, high repair costs, late harvest
2. Indirect losses: Decrease in FFB quality due to processing delays

Insurance solutions:

1. Contractor’s Plant and Machinery Insurance (CPM) for heavy equipment
2. Motor Vehicle Insurance + Third Party Liability (TPL) for four-wheeled vehicles and trucks

Broker’s role:

Assessing the value of equipment and vehicles, ensuring the expansion of protection in accordance with operational needs in palm oil plantations, and preparing additional schemes such as damage insurance due to operator error.

5. Productivity Risks and Operational Disruptions

Disruptions in one aspect can have a domino impact on the entire process. For example, damage to a garden road due to flooding can stop transporting FFB for several days.

Potential risk of operational disruption:

1. Massive pest attack
2. Labor strike
3. Local fire
4. Internal logistics disruption

Alternative solution:

Business Interruption (BI) insurance as a complement to property insurance, provides protection against loss of income during operational interruptions due to guaranteed risks.

Risk Management and Plantation SOPs

Risk management at the operational stage of palm oil plantations cannot depend on reactions after losses occur. A structured and systematic approach is needed so that every potential risk can be prevented, controlled or transferred before it has a major impact on the company’s productivity and finances.

1. Strict SOP implementation

Standard Operating Procedures (SOP) must be prepared for each main activity, starting from seeding, fertilizing, spraying, harvesting, to transportation. SOP is not only a technical field guide, but also an important supporting document in the insurance claims process.

1. Fertilization SOP: time, dose, type of fertilizer
2. Harvest SOP: harvest interval, maturity standards, post-harvest treatment
3. Work safety SOPs: use of PPE, accident protocols, work training

Note: Regular SOP documentation and training increases workforce risk awareness and reduces the potential for human error.

2. Risk Audit and Periodic Monitoring

Periodic risk audits should be conducted to review field conditions and the effectiveness of risk controls. Technology such as drones, soil sensors, and GIS can also be used to monitor areas prone to disasters or plant diseases.

1. Monitoring humidity soil → prevent root rot
2. Surveillance cameras → prevent fruit theft
3. Temperature alarm → prevent damage to storage facilities

3. Collaboration with Insurance Brokers

Brokers such as L&G Insurance Brokers are not only present when the policy is issued, but are also actively involved in the risk assessment process, evaluating SOPs, and recommending system improvements. We act as a risk management partner, not just a policy intermediary.

With technical understanding and industry experience, L&G helps plantation companies turn potential threats into real mitigation strategies, ultimately strengthening business continuity.

The Right Insurance Solution for Farm Operations

In the operational phase of an oil palm plantation — from seeding to harvest — various risks can threaten business continuity. Therefore, protection through an appropriate insurance program not only provides a sense of security, but also guarantees continuity of cash flow, production certainty and investor confidence.

The following are the recommended types of insurance, complete with their functions:

1. Work Accident Insurance and Employee Life Insurance

Field employees, both permanent and daily, face high risks every day. Injuries, equipment accidents, and exposure to chemicals are real threats.

1. Work Accident Insurance (PA Insurance): Provides compensation for death, permanent disability, medical expenses.
2. Group Life Insurance: Provides additional protection for workers’ families.

Additional benefits: Increase workforce loyalty and comply with labor regulations.

Broker’s Role: 

L&G helps design labor insurance packages that are integrated with BPJS, while adjusting benefit coverage to the characteristics of field workers.

2. Contractor’s Plant and Machinery Insurance (CPM)

Heavy equipment such as tractors, loaders, sprayers and dump trucks are important assets that operate in extreme terrain.

Risk:

1. Technical damage due to difficult terrain
2. Accident or collision in the garden area
3. Local fire or flood

CPM Solution:

Covers damage to heavy equipment, both during operation and at rest

Optional: extended coverage for damage due to operator negligence

Broker’s Role: Brokers like L&G help assess the fair value of equipment, recommend warranty limits, and accompany the claims process in the event of major damage.

3. Vehicle Insurance and Third Party Liability (TPL)

Fleet vehicles such as pick-ups, TBS trucks and operational vehicles face the risk of accidents, damage or claims from third parties.

Solution:

1. Motor Vehicle Insurance: Covers damage to or loss of vehicle units.
2. TPL: Covers compensation due to damage/injury to external parties.

Broker’s Role: L&G ensures the extension of protection to cover the unique terrain of plantation operations and helps speed up the claims process which is often hampered in remote areas.

4. Crop Insurance (Crop Insurance – If Available)

Even though it is not yet common in Indonesia, crop insurance for palm oil is really needed to protect against:

1. Crop failure due to extreme weather
2. Large scale pest attacks
3. Other biological risks

Note: Currently this type of insurance is still in the pilot project stage or collaboration with financial institutions and donor institutions. However, brokers play an active role in encouraging product innovation with insurance companies.

5. Property and Business Interruption Insurance

Garden facilities such as warehouses, base camps, fertilizer storage areas and harvest facilities must be protected from the risk of damage.

Solution:

1. Property All Risks Insurance (PAR): Covers damage or loss due to fire, flood, earthquake, etc.
2. Business Interruption (BI): Covers losses due to cessation of operations due to risks covered by the property policy.

Broker’s Role: L&G can develop an integrated PAR+BI program to maintain the stability of the company’s cash flow even if a disaster occurs.

6. Integrated Insurance Package

For large-scale companies such as PT Agrinas Palma Nusantara or other plantation holding subsidiaries, the best approach is to create an integrated insurance program that covers all operational lines, including legal and environmental responsibilities.

Peran L&G:

1. Develop a master program
2. Ensure global and local cover availability
3. Collectively negotiate premiums and clauses

The Role of Digitalization and Technology in Risk Mitigation

In the industrial era 4.0, digitalization plays an important role in increasing the effectiveness of risk management in the palm oil plantation sector. Technology such as the Internet of Things (IoT), drone surveillance, and cloud-based plantation management systems enable real-time monitoring of garden conditions, heavy equipment, weather, and workforce activities.

For example, using drones for regular plant inspections can detect disease symptoms more quickly than manual inspections. Humidity and rainfall sensors help farmers plan fertilizer or irrigation more precisely. Even ERP systems for plantations are now integrated with financial and insurance claims modules.

L&G Insurance Broker supports this digitalization with the system DISEASE, an insurtech platform that makes it easy to manage policies, risk reports, and track claims digitally — making insurance protection more responsive, efficient and well-documented.

✅ Conclusions and Recommendations 

Palm oil plantation operations are a phase full of challenges and complexity, where technical, environmental and human risks can arise at any time. Without mature risk management and proper financial protection, even small disruptions can develop into major losses that hamper business productivity and sustainability.

Through a combination of SOP-based risk management, the use of digital technology, and carefully designed insurance programs, companies can build a strong defense system to protect the value of their investments. This is where the role of an insurance broker like L&G Insurance Broker becomes very strategic — not only as a liaison with insurance companies, but also as a risk consultant who understands the industry and provides holistic solutions.

We are ready to be your partner in maintaining the stability and growth of the palm oil plantation business – from roots to fruit.

Looking for insurance products? Don’t waste your time and contact us now

HOTLINE L&G 24 JAM: 0811-8507-773 (CALL – WHATSAPP – SMS)

Website: lngrisk.co.id

Email: oktoyar.meli@lngrisk.co.id

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