Cannabis Insurance
in Hawaii
Hawaii was the first state to legalize medical use through the state legislature rather than through ballot initiatives. The state does not have a recreational program and there was no first medical dispensary until 2016. To stay afloat in a regulated climate, you must mitigate the risks to ensure the path to grow long-term in the fluid nature of the industry.
Understanding the Hawaii Cannabis Industry
Act 228 in 2000, permitted holders of medical cannabis cards to cultivate their own plants or designate a carer to do so, making Hawaii the 8th US state to legalize medicinal marijuana.
A measure to legalize recreational cannabis in Hawaii was just passed by the state’s Senate in March 2023, making Hawaii the nation’s 22nd legal recreational marijuana state.
Sales have decreased from an annual growth rate of 110% in 2019 to 68% in 2020 to barely 12% in 2021. This data shows that the cannabis industry in Hawaii has matured over the last few years.
Licensed medical cannabis dispensaries have had an annual market share of 31% among state-registered patients. More than 20,000 registered patients are now left without access to pharmacies. As a result, many patients mainly rely on the black market and, to some degree, their in-house-grown cannabis.
Data shows that just 26.5% of recently registered patients are being captured by dispensaries. This pattern suggests that, at its current rate, the market proportion of dispensary customers will gradually decline over time. However, this also means there’s huge potential for newcomers in the cannabis business to cater to all the recent demands.
Overview of Hawaii's Cannabis Market
The estimated 2021 economic benefits of the medical cannabis sector in Hawaii comprised $99 million in production, $30 million in profits, $4.7 million in state tax receipts, and 781 jobs.
The income for the State of Hawaii was $44 million in 2020 and $50 million in 2021. In 2021, Hawaii’s cannabis industry was expected to be worth $240 million, with 79% of sales occurring illegally.
According to official statistics, over 30,000 Hawaii residents and 1000 non-residents were registered patients in the state’s medicinal cannabis program as of November 2022.
Sales of medicinal cannabis in Hawaii are expected to reach a total of $63 million in 2022 and $74 million in 2023.
Sales were increasing continuously since the inception of the industry but a decreasing trend has been seen in recent years. This early quick growth symbolizes a newborn industry becoming mature, with a progressive slowdown in sales growth due to regulatory restrictions.
Hawaii Cannabis Laws and Regulations
A patient has to meet specific legislative illnesses under HRS 329-122, to get a medical cannabis prescription. A patient must also register with the state’s Medical Cannabis Registry Program besides fulfilling these conditions.
The laws of Hawaii have strengthened their protection of cannabis usage and expressed support for other types of Cannabis legalization. For instance, Act 242, which was also approved in 2015, included extra safeguards for patients and carers and outlawed discrimination based on the possession of a valid prescription for medicinal cannabis.
Act 170 mandated the use of the word “cannabis” in place of the term “marijuana” after the state’s legislature declared it to be “slang” and deeply rooted in racial stereotypes, in 2017.
The law, which became effective on July 12, 2022, permits dispensaries to buy up to eight hundred ounces of cannabis every 30 days from other cannabis shops, permits cannabis to be shipped between different dispensaries within an island under specific conditions, and expands the variety of grow rooms and plants that cultivators are permitted to maintain.
Risks Faced by Cannabis Businesses in Hawaii
The licensed medicinal cannabis patients in Hawaii are presently at risk. More than 20,000 people are left without access to the cannabis therapy that has been evaluated and is safe, therefore they are buying cannabis elsewhere.
The licensed medical cannabis dispensary program currently lacks the necessary regulatory framework to achieve the objectives of state policy. Future program expansion shows that both existing and new patients are still looking for cannabis outside the approved and supervised program.
Without significant regulatory and legislative reforms, the medicinal cannabis sector will not be viable in its current state and is going to collapse. In addition to the market not being financially feasible for licensees, it is also become more difficult to provide care to patients, particularly those in underprivileged communities.
The estimated 2021 economic benefits of the medical cannabis sector in Hawaii comprised $99 million in production, $30 million in profits, $4.7 million in state tax receipts, and 781 jobs.
The income for the State of Hawaii was $44 million in 2020 and $50 million in 2021. In 2021, Hawaii’s cannabis industry was expected to be worth $240 million, with 79% of sales occurring illegally.
According to official statistics, over 30,000 Hawaii residents and 1000 non-residents were registered patients in the state’s medicinal cannabis program as of November 2022.
Sales of medicinal cannabis in Hawaii are expected to reach a total of $63 million in 2022 and $74 million in 2023.
Sales were increasing continuously since the inception of the industry but a decreasing trend has been seen in recent years. This early quick growth symbolizes a newborn industry becoming mature, with a progressive slowdown in sales growth due to regulatory restrictions.
A patient has to meet specific legislative illnesses under HRS 329-122, to get a medical cannabis prescription. A patient must also register with the state’s Medical Cannabis Registry Program besides fulfilling these conditions.
The laws of Hawaii have strengthened their protection of cannabis usage and expressed support for other types of Cannabis legalization. For instance, Act 242, which was also approved in 2015, included extra safeguards for patients and carers and outlawed discrimination based on the possession of a valid prescription for medicinal cannabis.
Act 170 mandated the use of the word “cannabis” in place of the term “marijuana” after the state’s legislature declared it to be “slang” and deeply rooted in racial stereotypes, in 2017.
The law, which became effective on July 12, 2022, permits dispensaries to buy up to eight hundred ounces of cannabis every 30 days from other cannabis shops, permits cannabis to be shipped between different dispensaries within an island under specific conditions, and expands the variety of grow rooms and plants that cultivators are permitted to maintain.
The licensed medicinal cannabis patients in Hawaii are presently at risk. More than 20,000 people are left without access to the cannabis therapy that has been evaluated and is safe, therefore they are buying cannabis elsewhere.
The licensed medical cannabis dispensary program currently lacks the necessary regulatory framework to achieve the objectives of state policy. Future program expansion shows that both existing and new patients are still looking for cannabis outside the approved and supervised program.
Without significant regulatory and legislative reforms, the medicinal cannabis sector will not be viable in its current state and is going to collapse. In addition to the market not being financially feasible for licensees, it is also become more difficult to provide care to patients, particularly those in underprivileged communities.
Types of Cannabis Insurance Coverage in Hawaii
There is a wide variety of plans to choose from when it comes to you and your business. Some of these include:
Dispensary Insurance
Several risks specific to cannabis dispensaries can significantly affect the operations, due to which the state may require you to get comprehensive insurance coverage before issuing you a valid cannabis dispensary license.
Product Liability Insurance
Cannabis companies that offer tangible products or services risk third-party lawsuits claiming bodily injury or property damage. Products liability insurance covers defense fees and settlements, even for ungrounded claims. This coverage is particularly critical in the cannabis space as testing and manufacturing aren’t regulated at the federal level.
Property Insurance
Property Insurance is a first-party insurance policy, reimbursing cannabis companies for direct property loss (i.e., vandalism, fire, or natural disaster). This policy covers real property, business personal property, and cannabis inventory.
D&O Insurance
Shareholders, competitors, investors, etc., can sue a cannabis company’s executives, putting their personal assets at stake. Directors and officers (D&O) insurance protects these assets from lawsuits alleging leaders of wrongful acts managing the business.
Workers’ Compensation Insurance
Employers are typically responsible for their medical costs and lost wages when employees sustain work-related injuries. This policy covers these expenses, protecting employees while simultaneously keeping cannabis companies running smoothly
Several risks specific to cannabis dispensaries can significantly affect the operations, due to which the state may require you to get comprehensive insurance coverage before issuing you a valid cannabis dispensary license.
Cannabis companies that offer tangible products or services risk third-party lawsuits claiming bodily injury or property damage. Products liability insurance covers defense fees and settlements, even for ungrounded claims. This coverage is particularly critical in the cannabis space as testing and manufacturing aren’t regulated at the federal level.
Property Insurance is a first-party insurance policy, reimbursing cannabis companies for direct property loss (i.e., vandalism, fire, or natural disaster). This policy covers real property, business personal property, and cannabis inventory.
Shareholders, competitors, investors, etc., can sue a cannabis company’s executives, putting their personal assets at stake. Directors and officers (D&O) insurance protects these assets from lawsuits alleging leaders of wrongful acts managing the business.
Employers are typically responsible for their medical costs and lost wages when employees sustain work-related injuries. This policy covers these expenses, protecting employees while simultaneously keeping cannabis companies running smoothly
Choosing the Right Cannabis Insurance Policy in Hawaii
Being successful long-term in the cannabis marketplace has many different unique challenges. Navigating this specialty industry allows you to focus on protecting your employees, clients, and business for long-term success.
Working with an Experienced Cannabis Insurance Broker
AlphaRoot
AlphaRoot is a full service insurance brokerage that focuses exclusively in the cannabis, hemp, CBD, holistic medicine and psychedelic industries. We work with companies across the entire supply chain, from seed to sale, as well as, ancillary and capital providers. Our team is heavily invested in these industries and our goal is to help companies scale to propel them forward.
Factors to Consider When Choosing Cannabis Insurance
An insurance broker is responsible for different tasks. Hiring the wrong cannabis insurance broker will waste both your time and money. The right cannabis insurance broker will understand your values and bring the right solution to you. When looking for a reliable broker, there are some essential things to consider.
- Familiarity with this fluctuating cannabis industry.
- Do they offer risk management resources?
- Know their broker expertise.
- How many insurance carriers do they carry
- Can the broker analyze your contracts and advise you?
- You can add or ask for other things depending on your business’s status.
Common Mistakes to Avoid When Buying Cannabis Insurance
They don't purchase insurance at all
One of the biggest mistakes cannabis business owners are making is not having a policy at all. While the wrong policy is problematic, not having any coverage can be devastating to a new or even an established business. Investing in insurance covers the unforeseen and mitigates risk.
They don’t purchase cannabis specific insurance
Cannabis insurance is a very specialized niche in the insurance industry. Not all insurance agents/brokers have specific knowledge about the risks in the cannabis industry. Insuring cannabis is not like insuring your house or automobile strictly because of the nature of what you’re trying to insure and how it’s viewed by the government. If you don’t have a policy that is specific to cannabis, there may be certain exclusions based on the Schedule I status of cannabis or illegal substances.
They don’t work closely enough with a cannabis insurance specialist
Working closely with someone that knows the cannabis insurance industry is critical when choosing a policy. Cannabis business owners have to ask their agents/brokers questions, lots of questions and the broker/agent needs to be able to answer those questions.
Cultivators fail to buy crop insurance
If you are a cultivator or a grower, you rely on your cannabis crop for your income. Cannabis is agriculture, just like corn, wheat, or soy. Cultivators have to protect their income; therefore, they must have cannabis insurance and, specifically, crop insurance. Every year, wildfires ravage thousands of acres of land and crops, resulting in millions of dollars of losses for cultivators.
They don’t know what's included in their policy
As a cannabis business owner, knowledge is power. You have to be aware of the changing laws at the federal, state, and local level. You also need to know your business inside and out. Part of knowing your business is understanding what is and is not in your insurance policy. You have to know what is covered and what is excluded. There are many cannabis specific exclusions that are often overlooked. https://www.s2sinsure.com/post/cannabis-insurance-top-5-mistakes-to-avoid
Benefits of Cannabis Insurance for Hawaii Businesses
AlphaRoot is licensed to provide cannabis insurance coverage throughout Hawaii, not to mention across the entire US.
AlphaRoot is not in the insurance business. We’re in the business of guiding cannabis companies through the unique risks of our industry. It’s why we don’t merely broker insurance, we curate powerful cannabis risk management solutions.
Insurers looking to provide commercial cannabis insurance to this budding market should understand it’s rapidly shifting landscape. They must contend with legal uncertainty, evolving regulations, lack of data, and developing business practices. Insurers will also need to understand how the cannabis industry’s first and third‐party coverage needs are unique from other industries.
Currently, Hawaii has no legal insurance requirements for Cannabis businesses. However, if you’re entering a well-established market as a new Cannabis business you need insurance to protect yourself from losses and lawsuits.
- MSO’s
- Dispensaries
- Lab Testing
- Cultivation
- Investment Funds
- Manufacturing
- Distribution
- Technology
- Psychedelics
- Brands Service
- Providers
Cannabis Businesses
That May Need Insurance
Getting a Quote for Cannabis Insurance in Hawaii
Cannabis Insurance in Hawaii
Frequently Asked Questions
Cannabis insurance covers a range of risks associated with operating a cannabis business. This includes general liability, which protects against claims of bodily injury, property damage, or advertising injury.
Product liability coverage is also essential, as it protects against claims arising from the use or consumption of a cannabis product. Other types of coverage that may be necessary for cannabis businesses include property insurance, crop insurance, and cyber liability insurance, which protects against losses resulting from data breaches or other cyber incidents.
The cost of cannabis insurance in Hawaii varies depending on factors such as the type of business, the level of coverage, and the insurer. However, on average, cannabis businesses can expect to pay around a few hundred to tens of thousands of dollars per year for general liability and product liability coverage.
While Hawaii does not have a specific law mandating cannabis insurance, businesses in the cannabis industry are still required to obtain insurance coverage as a condition of their licensing. Without proper insurance coverage, businesses may face penalties or lose their license. For a cannabis business, it’s best to consult a cannabis-specific insurance company since they know the ins and outs of the industry.
Filing a cannabis insurance claim in Hawaii is a straightforward process that requires a few key steps. Firstly, you should contact your insurance provider as soon as possible after the incident or loss. Be sure to provide detailed information and any relevant documentation, such as photos, police reports, or witness statements.
Your insurer will then assess the claim and work with you to determine the amount of coverage you are entitled to receive. Throughout the claims process, it is important to stay in communication with your insurer and provide any requested information in a timely manner to ensure a smooth and efficient solution.