Paris-based AXA Group will expand its farm insurance program after the success of its pilot project in Malang, East Java, for which 1,000 farmers and 1,000 hectares registered last month, Albertus Wiroyo, the president of Mandiri AXA General Insurance, said here on Saturday.
The farmer insurance program is called parametric insurance because it protects farmers from harvest failures caused by weather risks such as rainfall, as measured against average rainfall forecast by the Meteorology, Climatology and Geophysics Agency ( BMKG ), but not against 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 isurance program,” Wiroyo said on the sidelines of a two-day business strategy meeting of the CEOs of AXA life and general insurance and asset management units.
The government started a farm insurance program this year with a budgetary allocation of Rp 150 billion ( US$11.25 million ) with a target area of 1 million ha, mostly in Java. Under the program, implemented jointly with state-owned PT Jasa Asuransi Indonesia ( Jasindo ), a participating farmer is given Rp 6 million worth of protection against harvest failure caused by climate and other risks, including pest infestation. A farmer is charged a premium of Rp 180,000 per ha, but 80 percent of it is subsidized by the government.
The insurance scheme will go a long way in encouraging farmers to cultivate rice and other secondary food crops because the insured farmers will have income even in years with severely impacted harvests.
According to Albertus, the biggest challenge for the insurance scheme, given the large number of farmers, is how to develop efficient distribution channels to access many small-scale farmers, design and introduce an insurance product that covers key risks, such as drought and flood, that can easily be understood by farmers and offered at an affordable premium.
France-based insurance giant AXA SA owns four Indonesian subsidiaries in the insurance sector, which are under the supervision of PT Asuransi AXA Indonesia. The AXA group also owns PT AXA Asset Management Indonesia, an investment management company.
The four insurance subsidiaries are PT AXA Life Indonesia, PT AXA Financial Indonesia, PT AXA Mandiri Financial Services and PT Mandiri AXA General Insurance.
Asuransi AXA Indonesia’s new CEO, Paul-Henri Rastoul, who chaired the AXA business gathering, cited the launch of the farm insurance program as part of AXA’s continued effort to design and introduce protection programs that catered to the specific needs, financial capacity and risks of different groups of people in the country.
“We are always committed to becoming the most-customer centric insurer in Indonesia in order to protect customers throughout their life journey, through suitable products and great services in the long run,” he pointed out.
Jean-Phillipe Vandenschrick, the CEO of AXA Mandiri Financial Services, explained that one of the latest products of its customer-centric principle was the micro-insurance program that had booked more than 1.5 million customers within less than two years after its launch.
Rastoul said the AXA Group, through its life and general insurance and asset management units in Indonesia, at present was the second-largest life insurer with 10.3 percent of the market and 11th in the general insurance market with 2.3 percent of the market.
He saw a very bright future for the insurance idustry in the country, taking into account its very low ( 2.5 percent ) insurance penetration, a steady ecnomic growth of 5 percent and a steadily increasing middle class.
The life insurance industry, he added, can also provide a source of long-term capital for funding infrastructure development, currently Indonesia’s top priority program, because life insurance liabilities are long-term and this corresponds well with the investment needs of large-scale infrastructure financing.
According to Rastoul, funds from long-term investors such as insurers and pension funds could play a big role in financing the massive infrastructure program and the development of infrastructure bond in Indonesia.
Jakarta Post
