Multinational insurer AXA has expanded its farm insurance program, following the success of its pilot project in Malang, Indonesia, where 1,000 farmers and 1,000 hectares were registered.
AXA’s farm insurance program aims to protect farmers from harvest failures due to weather risks, but does not include pest infestation.
“We are currently evaluating the project. But judging from its good performance, it could be used as a basic model to expand our crop protection to complement the government farm insurance program,” said Albertus Wiroyo, president of Mandiri AXA General Insurance.
The government-funded farm insurance program was founded this year with US$11.25m in budget, aiming to cover 1 million hectares of farmland, mostly in Java. Each participating farmer is given around US$450 coverage against both weather- and pest-related harvest failure. The premium costs US$13.50 per hectare, but up to 80% is subsidized by the government.
The insurance scheme aims to encourage farmers to grow rice and other secondary crops, as they will still have income even in years with severely impacted harvests.
Wiroyo added that the biggest challenges for insurance are the large number of farmers, the lack of efficient distribution channels, designing a product that covers key risks and can be easily understood by farmers, and keeping premium prices affordable.
According to Asuransi AXA Indonesia’s new CEO, Paul-Henri Rastoul, there is great potential in the country’s insurance market. While the insurance penetration rate is very low at just 2.5%, the economy is growing at 5% per year, and the number of middle class Indonesians is increasing.
Rastoul also added that funds from long-term investors such as insurers and pension funds can help finance the massive infrastructure program that Indonesia is currently undertaking, as well as help develop infrastructure bonds.
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