| Abstrak/Abstract |
Indonesia, an agricultural nation, relies on agriculture as its primary source of income. Given Indonesia’s abundant natural resources, agriculture holds immense potential for development. However, this industry carries inherent risks due to its vulnerability to climate change and the rising occurrence of natural disasters, even within Indonesia. To ensure the long-term viability of the agricultural sector, insurance emerges as a crucial tool. By having insurance coverage, farmers can experience a sense of security during unforeseen events, as the insurance company will partially bear the incurred losses. Consequently, apart from safeguarding the industry’s sustainability, insurance also contributes to increased farmer welfare by reducing the financial impact of losses. In addition to the benefits that insurance offers to agriculture, there are several things to consider. Indonesia, being an archipelago spanning from Sabang to Merauke, covers a wide expanse of land. As a result, the risk of natural and climatic disasters varies across different regions. This variation also affects the extent of losses experienced by farmers and indirectly impacts the premiums set by insurance companies. Insurance companies should not apply a flat premium to all population areas because there is potential for adverse selection in insurance products. Farmers who live in low-risk areas will feel disadvantaged because they pay more expensive premiums and farmers who live in high-risk areas will feel very favored. In view of this, this study will estimate the premium on each major island in Indonesia to determine the appropriate premium based on the risk of each island as a policy suggestion to the local government to apply the appropriate insurance premium so that insurance can ensure the welfare of farmers in a long period of time. |
