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

Abstract

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, throughRice Crop Insurance and Cattle Insurance. Generally, the strategies that can be performed to minimizemoral hazard practice in agricultural insurance programs are: Developing the capacity of humanresources, improving field communication, enforcing penalties, institutional strengthening, and addingnew products through Islamic agricultural insurance. Specifically, this paper proposes that the preventionof moral hazard practices can be done by implementing Islamic agricultural insurance systems with theconcept of risk-sharing instead of risk transfer