Optimizing crop insurance strategy as a protection tool from crop failure, due to climate change through private sector involvement

Abstract

The global food production process is being threatened due to the uncertainty experienced in the weather pattern, especially the agricultural sector being placed at the risk of unpredictable climatic conditions. Moreover, climate uncertainties, such as floods and drought, directly and indirectly, impact the level of crop failure. Therefore, Indonesia’s Government has launched a program known as the Rice Farm Insurance (AUTP) in 2015, using a state-owned enterprise as the single administrator to manage these challenges. However, several other problems have been discovered using this program, such as the low level of farmer participation, unprofitable portfolio management, and a limited number of farm areas. Therefore, this research aims to formulate an AUTP optimization strategy through the private sector’s involvement to mitigate these problems. The private sector’s inclusion in managing crop insurance is due to the US and some Asian countries’ success concerning its more comprehensive access to innovation, technology, and resources. The Analytical Hierarchical Process approach is a decision-making technique developed for cases with multiple analysis levels and used with the primary data obtained through questionnaires distributed to 5 experts representing the government, the general insurance industry, researchers, and farmers. The results showed that the influential actor was the government; the most successful factor was a collaboration among stakeholders. The prioritized objective was to increase farmer participation. The selected strategy was to form a consortium of public and private sector enterprises.