Emerging Trends in Cannabis Insurance: Staying Ahead of the Curve

Cannabis is a unique industry for insurers. Federal prohibition and banking challenges make the industry more complicated (and risky) to insure than other verticals. As a result, not every insurance company is willing to work with cannabis companies.

This status is, of course, endlessly frustrating for canna-businesses — but you do have options for cannabis insurance. And as the legalization of medical and recreational cannabis continues to spread through the country, more insurance companies recognize the benefits of working with cannabis companies.

Recently, some major players in the insurance space have quietly entered the cannabis industry. Existing smaller companies are expanding their cannabis coverage, and all around, cannabis insurance is growing. But because cannabis is unique, working with a company that understands the industry is crucial.

There are typical business risks, like general liability and employee protections, but there is also an elevated risk of theft, product liability, and risks around financing that owners must consider.

Let’s hone in on four trends that have surfaced recently, highlighting their legitimacy and importance to the cannabis insurance industry.

1. Increasing Demand for Cannabis Insurance

Legitimate cannabis businesses need insurance — just as every business in every industry does. In years past, plant-touching or adjacent companies had limited options for finding coverage — but that is changing. As more states become legal, more businesses come online that need insurance. But there is no “one-size-fits-all” option for canna-businesses, even those within the same state. The unique risks of cannabis mean each coverage program must be personalized.

This personalization only works with insurance companies that understand the cannabis industry and its different verticals. We won’t see a slow-down in coverage needed anytime soon — but perhaps we will see more qualified, experienced cannabis insurance companies on the scene.

2. Development of Customized Insurance Products

As explained above, niche markets such as cannabis require tailored insurance plans. Each of these programs may look similar and have overlapping coverage. However, there cannot be a “copy/paste” of these policies from one business to the next. Cannabis insurance companies like AlphaRoot must develop customized policies to ensure we’re meeting the unique needs of each business within cannabis.

A dispensary may need product liability insurance and theft coverage that a cultivator doesn’t need, but the cultivator must have crop loss coverage. A vertically-integrated company will need all three of these policies and then some. An ancillary business that doesn’t touch the plant will have different needs than one that handles cannabis directly. To get the tailored insurance programs your company needs, you need to work with industry experts – not just insurance experts, but cannabis experts too.

3. Growth of Cannabis Insurance Tech

The rise of tech has touched every industry, cannabis included. New technology can make customizing insurance programs easier for insurance companies. Leveraging this tech makes it faster to assess risk and accurately set premiums for each business.

Emerging tech has significantly changed underwriting, in particular. Artificial intelligence and machine learning can take on many tasks that underwriters previously had to do by hand, expediting the process and making it more streamlined for companies to get and compare quotes quickly. In addition to shortening timelines, tech can help underwriters create more accurate pricing models and apply more energy toward creating specialized insurance products.

4. Increased Regulatory Scrutiny

If insurance companies navigate the red tape of an industry, cannabis is a sea of regulations. These local, state, and federal regulations are subject to change without notice and must be more explicit. Yet, compliance is one of the most crucial tasks of a cannabis business.

Staying compliant is a heavy undertaking for an already-burdened business owner, but it must be at the top of your to-do list. Staying on top of the news, subscribing to industry and regulatory newsletters or blogs, and enlisting a partner in your cannabis insurance company are all ways to keep on top of regulatory compliance.

Insurance companies can partner with a company navigating the regulations, helping cannabis leaders understand and comply with regulations at every level. As legalization grows, so does the scrutiny at the state and federal levels for companies falling out of compliance.

Understanding what’s coming is the first step in being prepared. But navigating the world of cannabis insurance is not something that any business owner can or should do alone. Working with an experienced partner is a savvy way to stay ahead of the curve.

Regularly review your current insurance policies to understand your coverage fully. Stay informed on changing regulations, and keep your risk management plan current. All of this is made easier by working with specialized cannabis insurance brokers. If you don’t have someone in your corner or don’t know where to start, a consultation with a cannabis insurance expert can help get you on the path to long-term success.

Protecting your cannabis company can seem confusing; however, we’re a full-service insurance brokerage working with carriers worldwide to offer you the best coverage possible. We’re here to help! Please reach out to us today by emailing [email protected] or calling 646-854-1093 for a customized letter of commitment or learning more about your cannabis insurance options