Cannabis Industry Finding Insurance Coverage with Smaller Carriers

Niche brokers and carriers filling a void in a high-risk industry

As more and more states legalize marijuana for recreations and medicinal purposes, we see legitimate cannabis-based businesses popping up. These are both brick-and-mortar establishments and on-line operations. Of course, just like all businesses, they need to consider business insurance.

However, marijuana is still considered by the federal government to be an illegal drug. This explains the unwillingness on the part of many of the larger insurance companies to underwrite policies for marijuana businesses. But those in the cannabis industry need business insurance the same as do other types of businesses.

Currently, the lesser-known insurance carriers recognize this and are increasingly willing to fill the void. They’re cautiously offering an assortment of coverage, including General Liability, Product Liability and Workers’ Comp. Savvy business people see opportunity in the cannabis industry. Savvy insurance brokers know the high-risk nature of the product is an indicator of premium for an insurance broker. Of course, the higher the risk, the higher premium.

In California alone this is a multi-billion-dollar industry. Those numbers will certainly result in more types of policies being offered and increasingly competitive pricing.

Conflict and confusion

The federal Controlled Substance Act prohibits the possession and production of marijuana. This accounts for why general exclusionary language may not adequately define what is covered in a policy. Conflicting state and federal laws cause confusion in some property and casualty policies that contain exclusionary clauses or illegal substance exclusions.

Oregon’s Department of Consumer and Business Services proactively instructed insurance carriers to clarify such uncertainties in their policies. It declared that property and casualty policies should clearly state whether cannabis-related activities are covered and which activities are considered illegal.

The bottom line

Competition among insurance companies willing to enter the marijuana market will soon increase. And that means cannabis businesses will have higher quality insurance products and coverages from which to choose.

Source:  “Niche Insurance Firms Are Helping the Cannabis Business.”  www.civilized.life. Sep 13, 2017.