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Comparison study of agricultural insurance government subsidy and farmers? self-subsistent premium in Indonesia

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  • Muhammad Yasir Yusuf
  • Rahmat Fadhil
  • T. Saiful Bahri
  • Hafiizh Maulana

Abstract

Agricultural Insurance as an embodiment of farmer protection and empowerment is carried out with The Rice Farming Business Insurance (AUTP) facility with an insurance premium scheme by the Government of 80% and 20% by farmers. This study aims to simulate the AUTP premium based on government?s subsidy and farmers? self-subsistent premium. The simulation test used panel data estimates in Indonesia Province during 2016-2019. The AUTP premium simulation was identified through the Moderating Regression Analysis (MRA) approach, with the moderate variables being government subsidies and farmers? self-subsistent premium. The Government's premium subsidy policy became a pure moderator that significantly increased the AUTP land area by 0.057%. Meanwhile, the coefficient of the farmers? self-subsistent premium variable has a negative and significant effect on the realization of AUTP in Indonesia. The results of the policy simulation emphasize the importance of the government's role in encouraging the increase in the realization of AUTP through subsidizing premium assistance to farmers. The implication of this simulation of the MRA model is that the response and participation rate of the farmers? premium payments independently is not followed by an increase in the realization of AUTP in Indonesia. The policy implications in the simulation of the two equation models conclude the importance of managing subsidized farmer premium payments and self-subsistent schemes based on insured land and farmer insurance policy. Agricultural insurance policy needs to adopt risk management tools, diversify agricultural insurance programs, and calculate the willingness to pay agricultural insurance premiums appropriately.

Suggested Citation

  • Muhammad Yasir Yusuf & Rahmat Fadhil & T. Saiful Bahri & Hafiizh Maulana, 2021. "Comparison study of agricultural insurance government subsidy and farmers? self-subsistent premium in Indonesia," Economia agro-alimentare, FrancoAngeli Editore, vol. 23(2), pages 1-24.
    • Handle: RePEc:fan:ecaqec:v:html10.3280/ecag2-2021oa12184
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    References listed on IDEAS

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    1. Olivier Mahul & Charles J. Stutley, 2010. "Government Support to Agricultural Insurance : Challenges and Options for Developing Countries," World Bank Publications - Books, The World Bank Group, number 2432, December.
    2. Jean-Paul Chavas & Salvatore Di Falco & Felice Adinolfi & Fabian Capitanio, 2019. "Weather effects and their long-term impact on the distribution of agricultural yields: evidence from Italy," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 46(1), pages 29-51.
    3. Salvatore Di Falco & Felice Adinolfi & Martina Bozzola & Fabian Capitanio, 2014. "Crop Insurance as a Strategy for Adapting to Climate Change," Journal of Agricultural Economics, Wiley Blackwell, vol. 65(2), pages 485-504, June.
    4. Council on Food Agricultural and Resource Economics, C-FARE, 2016. "2015 Annual Report," C-FARE Reports 260839, Council on Food, Agricultural, and Resource Economics (C-FARE).
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    1. Fadhil, Rahmat & Yusuf, Muhammad Yasir & Bahri, T. Saiful & Maulana, Hafiizh & Fakhrurrazi, Fakhrurrazi, . "Precaution Strategy of Moral Hazard Practice in Agricultural Insurance in Indonesia: An Approach of Soft Systems Methodology," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 21(02).

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