Cannabis industry experts at BDSA Analytics project the global sales of cannabis will increase by 22% over last year’s figures, reaching $35 billion in 2022. The legal cannabis market is poised to grow 20-30% per year and is expected to reach $50 billion by 2026.
As sales of legal cannabis continue to grow, so will its impact on the insurance industry. Currently, only a limited number of insurance brokers work in the cannabis market due to inherent risks. Conflicting state and federal laws, emerging standardization of business practices, and rapidly evolving regulations have discouraged many insurers from delving into this market. It’s critical for cannabis-related businesses (CRBs) to work with wholesalers that have industry-specific knowledge and markets with the proper coverage capabilities.
Cannabis businesses are exposed to a variety of issues, including cybersecurity vulnerabilities, claims from customers, employees getting injured at work, crop losses, and the financial risks of theft, fire, and/or extreme weather events. Therefore, advise your cannabis clients to secure the proper insurance coverage to mitigate numerous risks. This coverage includes, but is not limited to:
Commercial General Liability: General Liability is essential to protect CRBs from various claims, including personal injury, bodily harm, property damage and potentially damaging situations such as slander, libel, copyright infringement, etc. CRBs, like other agricultural businesses, face risks including workplace accidents, damage to property, and crop failure. Also, if your cannabis products result in injury, illness, or detrimental side effects, your customers may hold you liable.
Workers’ Compensation: Like any other business, CRBs face threats of employee accidents while on the job. The cultivation process runs risks like any other agriculture endeavor. Processing, drying, curing, and packaging incur the same perils as other manufacturing lines. An additional threat within this industry is the process of extracting CBD oil, which involves flammable solvents and dangerous chemicals. Be certain that CRBs are covered in case of employee injury, illness, or even death on the job.
Property: Fire, theft, and extreme weather events are risks for property loss, much like any other commercial business. But the cannabis industry also has inherent risks from the volatile chemicals used in cannabis manufacturing, which may increase the chances of fire or explosions. Storm losses on crops may require specific crop coverage in addition to general property insurance. And some CRB facilities include expensive equipment for growing and manufacturing cannabis products, which must also be covered. Unlike many other companies, CRBs face an increased risk of theft because federally regulated banks are reluctant to accept deposits, creating a cash-heavy environment for owners. This type of insurance also covers less common risks like riots and terrorism. Property Insurance pays for damages to your business property and its contents (e.g., furniture, computers, inventory, and other assets) resulting from a covered loss.
Business Interruption Insurance: Business Interruption Insurance, also known as Business Income Insurance, is an additional Property Insurance component that covers loss of income if your company suffers a disaster that requires the facility to be temporarily closed. Business Interruption Insurance also covers income losses in the event of a government-mandated closure.
Product Liability: Medical CRBs face the same product liabilities as any other pharmaceutical businesses except the products are still so new that regulations are still being written. Consistency among strains of plants may create liability issues. And cannabis-infused edibles carry similar risks to other manufactured food products, including product contamination, safety issues, and recalls.
Cyber: With cybercrime on the rise across all business sectors, cyber fraud and data breaches are two of the biggest risks that CRBs will face in 2022. Medical cannabis businesses often store patient medical records, making them possible targets for cybercrime. Additionally, most states require very stringent record-keeping around medicinal cannabis. Protect your clients in the event of a cybercrime or data breach, which could otherwise be extremely costly and damaging.
Jencap’s specialized cannabis team understands each and every unique underwriting intricacy of this industry. We effectively assess the exposures and needs of our agency partners’ CRBs and provide tailor-made, winning insurance solutions. Tap into the power of our dedicated cannabis team.