Cannabis sales in 2021 were $26 billion according to Flowhub and are expected to top $32 billion in 2022. The industry currently supports over 400,000 jobs. New Frontier Data estimates the value of the industry could top $57 billion by 2030. That’s pretty significant growth for an industry that’s still federally unregulated.
According to the National Conference of State Legislatures, medical marijuana is currently legal in 37 states, three territories, and Washington, DC Recreational or non-medical marijuana is legal in 19 states, Washington, DC, and two territories.
Charles Pyfrom is the Marketing Director of CannGen Insurance Services, based in California, which offers a full range of insurance products for growers, distributors, laboratories, processors and harvesters, as well as transporters, manufacturers, dispensaries and other cannabis, hemp and CBD-related businesses. He has been part of the company’s management team since 2017 and oversees CannGen’s carrier and broker relationships, and manages their program development and long-term underwriting strategy. With over 14 years of experience in the insurance industry, he understands the risks and coverage needs of a wide variety of businesses.
PropertyCasualty360.com asked him to share what he sees in the industry, how pending legislation could affect insurers, banks and cannabis entities, and about common risks businesses may be overlooking.
PC360: Given that dispensaries are highly profitable businesses, what are some of the unique security challenges they face and how can they address them? What are the risky products or strategies to consider?
Pyde: Theft and burglary are common concerns among dispensaries in legal markets. CannGen asks its customers to keep all their money in a safe or vault to avoid this. Additionally, we suggest that companies have strong security protocols, whether it be personnel or security systems to monitor their facilities. It is important that dispensaries also ensure product liability coverage.
PC360: What types of insurance should dispensaries carry to protect their business and employees? What factors go into determining appropriate coverage limits for a business?
Pyde: While we believe the coverages a dispensary needs will vary from company to company, some typical coverages include product liability, workers’ compensation, property, general liability, transportation and, in some cases, especially with large dispensary chains, management responsibility.
There are a variety of factors that help determine coverage limits, including the safety and security measures a company takes and the size of its business. At first, it was difficult for us to determine the level of coverage required by different types of cannabis businesses, primarily because this is a relatively new legal industry to have insurance needs, but after worked with some of the largest multi-state cannabis operators and approximately 10,000 cannabis businesses in the United States, we have a very clear idea of what those limits are.
Additionally, many states where cannabis is legal require these types of businesses to meet a minimum limit for specific lines of insurance.
PC360: What questions should they ask their broker or agent to ensure they are aware of the risks cannabis businesses face?
Pyde: In addition to general questions about the risks facing their specific business, dispensary owners should ask their agent about location-specific risks and/or state/city-specific coverage requirements. They should also have a conversation about how their coverage limits may increase as the business grows and how coverage may change as new cannabis regulations and laws come into effect.
PC360: Are there more carriers offering coverage now? Is insurance coverage a little easier to get, or is it still a challenge since cannabis is federally illegal?
Pyde: It’s not hard for cannabis businesses to get insurance coverage, but it’s hard for them to find a carrier that gives them all the coverage they need in one place. Many cannabis businesses have to use multiple vendors to ensure their money, products, assets, and employees are safe.
We were the first Managing General Underwriter (MGU) to focus exclusively on the legal cannabis industry and we are one of the only ones to offer all the coverage a dispensary or other cannabis business might need to be fully compliant and secure.
PC360: If the SAFE Banking Act is passed, what protections will it provide cannabis businesses in the short and long term?
Pyde: The SAFE Banking Act has the power to create hugely positive change in the cannabis industry and could significantly reduce the risk of theft and make it safer for cash-only cannabis business employees.
Enabling legal operators to finally have access to much-needed banking services and loans – like any other traditional industry – will not only help current businesses, but encourage new players large and small to enter the market. . Our goal is to insure all these businesses, regardless of their size, so that they feel safe.
PC360: Are there any common mistakes dispensaries make when assessing their risk? What role does a strong risk management plan play in helping cannabis businesses obtain insurance coverage?
Pyde: Risk management is the number one priority when it comes to helping cannabis businesses obtain coverage. Make sure your insurance provider knows the nature of your business. If you don’t and your insurer learns you work with cannabis after you file a claim, they may not honor your policy.
Having general liability coverage at the heart of their insurance policy protects their assets from a lawsuit and ensures that they have the necessary funds to maintain their business. Property insurance covers cash, valuable documents, equipment and machinery, products and even the personal effects of employees and visitors.
But what many dispensary owners don’t think about is the risk associated with their employees. Like any other business, dispensaries must ensure that their employees are covered in the event of any type of accident. Earlier this year, CannGen announced that we are now offering lower workers’ compensation rates so businesses of all sizes can take advantage of this type of coverage.
Editor’s Note: ALM recently launched the Cannabis Insurance Coverage Specialist (CICS) designation which provides a general overview of the cannabis industry, a review of issues related to risk management, real estate and claims, workers’ compensation and legal employment issues, and a review of factors sales advisors should consider when working with cannabis businesses. For more details on SCIC, visit nutraining.com.