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Precaution Strategy of Moral Hazard Practice in Agricultural Insurance in Indonesia: An Approach of Soft Systems Methodology

Author

Listed:
  • Fadhil, Rahmat
  • Yusuf, Muhammad Yasir
  • Bahri, T. Saiful
  • Maulana, Hafiizh
  • Fakhrurrazi, Fakhrurrazi

Abstract

[EN] This paper uses Soft Systems Methodology (SSM) to formulate strategies to prevent moral hazard acts in agricultural insurance in Indonesia. Agricultural insurance takes place, mainly, through Rice Crop Insurance and Cattle Insurance. Generally, the strategies that can be performed to minimize moral hazard practice in agricultural insurance programs are: Developing the capacity of human resources, improving field communication, enforcing penalties, institutional strengthening, and adding new products through Islamic agricultural insurance. Specifically, this paper proposes that the prevention of moral hazard practices can be done by implementing Islamic agricultural insurance systems with the concept of risk-sharing instead of risk transfer. [ES] Este trabajo utiliza Soft Systems Methodology (SSM) para formular estrategias para prevenir el riesgo moral en los seguros agrícolas en Indonesia. El Seguro de Cosecha de Arroz y el Seguro de Ganado son los más utilizados. Las estrategias son: desarrollo de la capacidad de los recursos humanos, mejora de la comunicación sobre el terreno, aplicación de sanciones, fortalecimiento institucional e incorporación de nuevos productos a través del seguro agrícola islámico. En concreto, se propone que la prevención del riesgo moral puede realizarse mediante sistemas de seguros agrícolas islámicos basados en el concepto de compartir el riesgo en lugar de transferirlo.

Suggested Citation

  • 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).
    • Handle: RePEc:ags:earnsa:329147
    DOI: 10.22004/ag.econ.329147
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    References listed on IDEAS

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    1. Simtowe, Franklin & Zeller, Manfred & Phiri, Alexander, 2006. "Determinants of Moral hazard in Microfinance: Empirical Evidence from Joint Liability Lending Schemes in Malawi," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25287, International Association of Agricultural Economists.
    2. Bruce A. Babcock & David A. Hennessy, 1996. "Input Demand under Yield and Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 416-427.
    3. 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.
    4. Carl H. Nelson & Edna T. Loehman, 1987. "Further Toward a Theory of Agricultural Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(3), pages 523-531.
    5. Simtowe, Franklin & Zeller, Manfred, 2006. "Determinants of Moral Hazard in Microfinance: Empirical Evidence from Joint Liability Lending Programs in Malawi," MPRA Paper 461, University Library of Munich, Germany.
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