Abstract
Crop insurance product based on rainfall index is an alternative product to minimize the risk in the agricultural sector. Rainfall index is supposed to represent crop failure in a specific area. Rainfall index is composed of parameters, trigger, and exit. The trigger is a benchmark value of rainfall that causes the partial risk and gives the right to the policyholder to begin partial benefit payment. The exit is the benchmark value of rainfall that consists of total crop failure and assigns the right to the policyholder to submit full benefit claim. The trigger and the exit in a rainfall index provide the value of the premium. A case study is carried out with cumulative rainfall data from June to August in the Dramaga area of Bogor from 1984 until 2017 to ensure paddy. The two-component Gamma Mixture distribution model is applied to determine the rate of premium that must be paid by the policyholder on the specified rainfall index.
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