Insurance markets for cannabis are still limited despite the impressive growth of the industry. Insurers must contend with a patchwork of state regulations, federal illegality, and a lack of data on this emerging market.
In the US, 33 states and District of Columbia allow for the use of medical marijuana. In addition, 10 states and D.C. have adult use laws on the books. The industry is projected by some analysts to surpass $24.5 billion in revenue by 2021.
While the majority of states have accepted medical marijuana, federal illegality remains a problem for insurers. It’s difficult enough to work within the regulatory patchwork of state law, but the current status of marijuana as a Schedule 1 drug makes this space questionable, at best, for carriers.
Another big issue for carriers is the lack of data on this emerging industry. Underwriters rely on actuarial data and loss histories to determine appropriate limits and accurately price coverage. The lack of data has left underwriters hesitant to offer higher policy limits and pricing remains high for certain lines of coverage. Policy terms and conditions are also problematic for many cannabis companies who find coverage lacking in certain key areas such as duty to defend.
It may be some time before insurers fully embrace cannabis. In the meantime, Cannapreneurs need to take their risk management program seriously and look to insurance as a secondary safety net.