The Golden State Could Be a Game Changer for the Marijuana Insurance Industry
©2017 Greenpoint Insurance Advisors, LLC
Breaking news out of California when The Californian reported California Insurance Commissioner Dave Jones wants admitted insurance carriers to insure marijuana. This will not be an easy task for Commissioner Jones considering the fact Lloyds of London does not offer insurance to the marijuana industry.
For those who may not know, admitted insurance carriers are well known companies approved and subjected to regulation by the state in which they operate. Admitted insurance carriers are typically companies like Travelers, Hartford, Farmers, and State Farm to name just a few. Historically, these companies have no interest in insuring marijuana.
Currently, the cannabis insurance industry purchases insurance through the non-admitted insurance markets. There is less competition, more stringent underwriting, and limited coverage offerings. For example, product liability and directors and officers insurance is extremely difficult to procure. The few insurance carriers offering the coverage dictate the terms leaving the cannabis business with few options. In our experience, most cannabis businesses simply opt out of insuring these risks all together.
If Commissioner Dave Jones is able to convince admitted insurance carriers to start insuring the cannabis industry, those carriers will need to carefully analyze the underlying risks, federal challenges, and repercussions to their reputation in states that are less cannabis friendly. We know that insuring of medical and recreational marijuana businesses has been profitable to the non-admitted insurance markets when distributed through the right channels. The most common claims have been theft of cannabis and employee injuries at a profitable level. Based on our knowledge product liability claims are rare.
The fact that marijuana remains a schedule 1 drug will have admitted insurance carriers analyzing any governmental contracts that could be terminated. The impact on their reputation will be perhaps the most difficult to predict. The majority of the United States (Procon.org: 29 States) has either recreational or medical marijuana laws may lessen the impact the first time a consumer in Arkansas sees their local agent advertising they sell marijuana insurance.
Admitted insurance carriers typically have either dedicated captive agents or independent brokers who by contract represent that particular carrier. The amount of competition and access to these types of insurance products will indeed offer the cannabis industry access to insurance products they never thought was possible.
The non-admitted insurance industry will be out of business if Commissioner Dave Jones gets his way
The impact on the non-admitted insurance industry will be devastating as clients flock to those retail insurance brokers or agents for better pricing and coverage options. Like Commissioner Dave Jones stated in The Californian more insurance carriers competing is good for the industry with better pricing and coverage options.
California could be the tipping point for the insurance industry as thousands of businesses prepare to become licensed and operate in the golden state.
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