The markets for medical and recreational marijuana are expanding fast with 28 states having medical marijuana laws and eight states with recreational marijuana laws. Some predict that within five years, every state will legalize marijuana.
Cannabis-related businesses are proving to be an attractive insurance market but given their limited track record, a word to the wise: understand the risks and how the market will evolve before writing it. Patriot is offering cannabis workers compensation and employee liability coverage in 13 states, but only in limited classes, including growers, processors, laboratories, retail and clubs. We’re optimistic about the growth and stability of the market however we’re also taking it one step at a time.
There remains a certain stigma with cannabis related businesses which we think will dissipate over time. As demand grows, so will the number of businesses serving each market segment. The quality of these businesses may grow more uneven with this expansion. At this stage, however, we have discovered that these business owners are like any other – professional and responsible. They are also ready and willing to obtain the necessary coverages to support their operations and ride the expected growth wave. That said, these businesses do face a unique set of exposures. For one thing, many deal primarily in cash. With existing federal regulations, banks with interstate business activities may not provide financing or accept deposits. The risk of theft by employees and the risk of injury to employees during robberies is also higher. Growers and processors must cope with pollution liability and there is an ever-present exposure stemming from neighbor complaints.
Agents will also need to recognize the fact that because this market is so new and insurers are entering it with caution, underwriting guidelines and policy forms will change, perhaps significantly. For this reason, agents should decide what level of commitment they’re willing to make.
*Patriot Underwriters, Inc. conducts insurance business in all of its licensed states as PUI INSURANCE AGENCY