The legalization of cannabis in many states is helping the industry become mainstream and gain access to insurance products taken for granted in other economic sectors.
But there is still a long way to go until the cannabis insurance industry becomes completely normalized. The uncertainties and limitations of available coverage also impact cannabis-adjacent businesses, such as warehousing, transportation, security, packaging and marketing.
As the North Bay cannabis industry continues to grow, the need for insurance coverage becomes paramount, but there are still significant coverage gaps to fill.
Although most state and local governments have strict licensing requirements, including proof of insurance or surety bonds, there is still a perceived legitimacy issue. Many insurers are wary to insure what is still an emerging and unknown risk, preferring to gather more information and determine the loss ratio trends before offering insurance products to the cannabis industry.
However, that is changing, and a few enterprising insurers are taking advantage of this new, large, and underserviced market.
The California Department of Insurance has been instrumental in bringing about these changes by actively encouraging commercial insurance companies to write insurance for all aspects of the cannabis industry. If the cannabis industry is to thrive, business owners, workers, property owners, and consumers alike must be able to rely on the protections available to other industries. Last year, the first admitted commercial carrier was approved to offer various types of cannabis insurance coverage in California, and a second carrier was approved in February, with more looking to following suit. Increased competition will allow cannabis businesses to shop for better protections and better prices.
Given that the cannabis insurance market is still developing, North Bay cannabis business operators should proceed with caution, but should not forgo proactively obtaining as much coverage as necessary to implement their risk-management plan. The minimum insurance required for licensure is often insufficient.
Founder & Interim Editor of L.A. Cannabis News