Are There Any Experts in the Room?
The insurance industry is not short of professionals and experts. Drive down Any Street, USA and you can find a brokerage or retail agency. The traditional method for purchasing insurance has stayed the same for many years and I’m sure you’ve experienced it. Fill out applications, get some quotes, and pick what looks best. All these experts. All these options.
But what about the cannabis insurance space? Where are all the experts when it comes to insuring a cannabis businesses? In California, there are currently approximately 130 insurance agencies on the Division of Insurance’s list of cannabis insurance providers. In Massachusetts, there are about 25 agencies actively engaged in the cannabis industry. Compare that to over 1200 insurance agencies that are represented by the Massachusetts Association of Insurance Agents. So, where are all the experts? Where are all the options?
I most likely don’t need to tell you that the cannabis industry is relatively new and constantly evolving. Insurance companies aren’t quick to jump on new and emerging industries without solid actuarial data of the risk they are insuring. However, many insurance agencies will jump at this opportunity as an exercise in supply and demand. That leaves you, the consumer, feeling like you have limited resources, options, and control. So, when push comes to shove, why not choose the “expert”, right? Be careful with that line of thought.
New cannabis based insurance policies are hitting the market. The industry is evolving on a daily basis. The industry started very conservatively with traditional liability limits. Cannabis business owners were requested $1,000,000 occurrence and $2,000,000 aggregate limits. Already, that has scaled. It isn’t uncommon to see limits of $5,000,000 with Umbrella Coverage on top of that. With the changes in limits, come changes in policy language. Are you reading up on all the language in the policy as the industry evolves? Is your agent? Some policies are adopting language that excludes coverage for products that are not traceable by a specific tracking method. Others may exclude coverage for products with relatively high concentration of THC? And what about your budtenders? Are they covered for their professional liability when suggesting cannabis products to consumers? And what about Cyber Liability? Oh boy – that is a blog for another time.
The positive side of all of this change is that the insurance claims experience in the cannabis space has been favorable thus far. The industry is seeing product recall, contamination, and laboratory testing claims. But the third party liability claims are lower in severity and frequency than anticipated. This is good news – but be cautioned the industry is still relatively young and constantly evolving.
We’ve done the policy autopsies and developed comparison charts. We continue to work with Cannabis industry CPAs and attorneys to stay abreast of changes in the industry. It is imperative that we continue to do this. As we lean on our experience in mitigating risk, transferring risk, and developing comprehensive Risk Management plans we are cautious to be sure to let clients know that there are no experts in this space yet. We are among those of you who are learning, growing, and evolving with the opportunity. Our Risk Reduction Plan allows us to help you grow, stay engaged with changes in the industry, and develop a profitable and protected business. Oh, and the other benefit to working this way – you’ll have some control over the future of your insurance program. So, remember – there may be self-proclaimed “experts” out there, but be careful of traditional solutions in a non-traditional industry.