The third annual Insuring Cannabis Summit took place entirely online this year and focused on the insurance risks and opportunities in the cannabis marketplace.
The event, hosted by Insurance Journal, included presentations from 27 marijuana industry experts discussing topics like risk management, the future of the cannabis industry, marijuana laws and regulations, and the business of selling cannabis insurance.
After a year of unprecedented growth in state-legal cannabis markets, when the industry was largely deemed essential by state officials during COVID-19 lockdown measures, and with a raft of new states recently moving to legalize recreational marijuana, many speakers considered the new landscape for insurers as the sector matures and becomes mainstream.
Morgan Fox, media relations director at the National Cannabis Industry Association, discussed the prospects of federal marijuana legalization, in particular the draft Cannabis Administration and Opportunity Act.
“The original draft was just a draft and luckily the Senate leadership, particularly Senate majority leader Schumer, as well as Sens. Cory Booker and Ron Wyden, have been very engaged with stakeholders in this process and took a lot of feedback over the months since that has been introduced or was released,” Fox said. “And now we’re just waiting to see what the actual bill looks like.”
Many marijuana businesses responded to calls for input on the bill to say the measure would put them at a big disadvantage to the illicit cannabis market due to its onerous tax obligations.
Even so, founder and CEO of Cannasure Insurance Services LLC Patrick McManamon said federal legalization would undoubtedly bring more carriers and reinsurers to the market which would add to the currently limited coverages and products that are on offer to marijuana businesses.
“That [federal legalization] would definitely bring in and open up that product set and it would continue to provide innovation insurance,” McManamon said. “Insurance is going through a huge innovation change right now, spurred by the pandemic and you’re seeing a lot of the way the carriers currently onboard customers, underwrite risk, how they secure data, that’s changing very quick and I think that this would be really be beneficial to the industry and you’d see a lot more change happening quicker, more sophistication coming into the space.”
Fox then went on to say that while marijuana businesses have seen promising growth, insurers haven’t been able to keep up due to federal prohibition but that we could soon be approaching a tipping point whereby insurers become indispensable to the industry.
“I think that the potential for growth is really huge, not just among direct-to-plant businesses, but in ancillary businesses as well,” Fox said. “And there will be a very strong need for those businesses to be able to obtain insurance products.”
But limited uptake of insurance by marijuana business owners isn’t all about federal restrictions. At the ‘Legal Spotlight’ discussion, managing director for Horst Legal Counsel PC Jason Horst said insurance consumers often aren’t seeking broad coverage and nor are insurers doing enough to push for more extensive policies without exclusionary language.
“I mean I think at least from my perspective, unfortunately, the typical cannabis policyholder is still too often viewing coverage as a box to check off for compliance purposes,” said Horst. “So, there’s not a great deal of pressure being placed on carriers to really push the envelope and broaden coverage from your average insurance consumer in the cannabis industry.”
Broader coverage, Horst said, will only happen when insurers move “to eliminate some of the more problematic exclusionary language that still exists in a number of policies that are written in this industry.”
Two other panelists, Jodi Green, an attorney at Miller Nash LLP, and Katie Podein, an attorney at Clark Howell LLP, discussed product liability lawsuits, as well as theft and crime issues arising from marijuana businesses’ limited access to banking.
“We’ve been wondering when the metaphorical dam’s going to break, and the product liabilities are going to come out of the woodwork,” Green said. “I feel like we’re starting to see the cracks in the foundation happening now, in respect of the product recalls.”
For as long as cannabis remains federally illegal, Podein advised marijuana businesses to go above and beyond security measures required by state law in order to protect their assets.
“So when we’re talking about security measures, it’s seeing what type of lighting they have around the perimeter. The fencing. Patrol. Is it on 24 hours?” she said. “Do they have limited access areas where only certain managers or employees can access? Key coded areas? Do they keep cash on hand? How much do they keep on hand? What is the vault like, or the safe room? Are they bolted to the floor and they fireproof?”
All of the panel discussions are available to view online at Insurance Journal’s website.