Increasing competition opens doors to lower rates, extended coverage
By Jim Shirreff
Lloyd’s of London dropped a bomb on the marijuana industry when it announced its withdrawal from the cannabis insurance market in May. Since Lloyd’s was far and away the market leader for insuring cannabis businesses, this caused a fire storm of panic. If Lloyd’s of London isn’t willing to provide coverage, who will? Many cannabis businesses are required to have insurance in order to receive a state license. Would this mean businesses could not get the coverage their licenses required? Their panic seemed justified, and phones started ringing off the hook for insurance agents.
Fortunately, the tight legal regulations in states like Washington and Colorado have provided some reassurance to the typically conservative insurance industry, and the path that Lloyd’s had blazed provided incentive for some even bigger fish to enter the market. Despite the murky legal status of marijuana, there were other carriers willing to take a risk on this booming new economy. Little did these forward-thinking insurance carriers know how opportune their timing would be. The best news for cannabis businesses everywhere is that these new products were designed from the beginning to compete with the Lloyd’s product, with better rates and better coverage. Now, cannabis-related businesses can purchase insurance products much like any other industry. Besides commercial general liability, we can now offer products liability, property coverage (as much as $10 million per location!), crop coverage, commercial auto insurance, workers comp and even business income coverage to protect your income during the down time after a covered loss. (Business income coverage could be the most important coverage you can buy. If you don’t have business income coverage, you should look into it as soon as possible.)
Unfortunately, the number of carriers willing to write coverage for the emerging medical and recreational markets are few and far between. Those that will provide coverage at the levels this industry requires are even harder to find. Therefore, it is vital for industry players to take into account best insurance practices: adhere to all company recommendations on loss control, properly secure your premises and property, and make sure all electrical work is done by licensed electricians. I believe self-regulation and personal responsibility will be of critical importance in the coming years. Although insurance claims are inevitable, insurance carriers hate losing money. So it is critical for the industry to continue to maintain the current high level of integrity and to weed out the “bad actors” and to treat their insurance carriers as partners in this emerging market. If insurance companies taking a chance in this space are profitable, this will invite other carriers to enter the market. And competition is good for rates.
In almost 30 years of experience working with hundreds of different insurance companies, one thing I have learned is that markets are constantly changing. Insurance carriers will come and go, rates will go up and down, and lines of business come in and out of favor. Just in the last two years, the changes in markets have been unprecedented. The only thing that remains constant is that an experienced, independent agent will be your best ally in navigating this emerging market. Whether you are a producer, processor, manufacturer, retailer, landlord or ancillary services provider, you should seek out an agent specializing in the marijuana industry in your state. They are most likely to be up to date on all the rapidly shifting markets and regulations.
Jim Shirreff is a commercial lines coverage specialist in the cannabis industry. He has owned Shirreff Insurance Agency for the last 28 years. He can be reached by email at firstname.lastname@example.org.