The adoption of shariah parametric weather index insurance remains nascent in Indonesia compared to traditional takaful and conventional parametric insurance models, Zurich General Takaful Indonesia (Zurich Syariah) president director Hilman Simanjuntak has said. Overall takaful penetration in Indonesia is pegged at less than 5%.
As Indonesia is a top coffee-producing and exporting country, Zurich Syariah launched its Shariah Parametric Weather Index Insurance product in 2022, the first-of-its-kind product for coffee farmers in Indonesia based on shariah. According to Zurich Syariah, the policy addresses financial vulnerabilities and acts as affordable, inclusive insurance for millions of coffee farmers.
Mr Hilman said that the product served farms that are mostly located in remote mountainous areas covered by rainforest, making conventional claims handling difficult and time-consuming.
Of Indonesia’s coffee plantations covering a total area of 1.27m ha, Mr Hilman said only around 11,000 ha were covered by parametric takaful. Adoption is hindered by limited awareness of insurance and poor access to banking.
He added, “At Zurich Syariah, we believe that by fostering collaboration between regulators, communities and industry players and by strengthening public literacy of innovative shariah-based solutions, shariah parametric weather index insurance can play a vital role in building community resilience, especially in areas with extreme weather.”
Mr Hilman, speaking to Middle East Insurance Review, pointed out that Zurich Syariah engages directly with local leaders and cooperatives to build trust and explain such policies “in a manner that is both culturally respectful and aligned with shariah principles”.
Representatives of farmers have also been trained to explain and publicise the takaful parametric policy, he said. Zurich Syariah is preparing flyers and other materials, such as videos for the purpose.
Mr Hilman also said that complex insurance concepts are simplified into relatable and real-life scenarios, especially for rural and underserved populations such as smallholder farmers and informal workers.
He said that while Zurich is educating farmers on the importance of a bank account, it is also exploring partnerships with FinTech providers, e-wallet platforms and local cooperatives to enable secure, shariah-compliant transactions – even for those without traditional bank accounts. M