State of the Cannabis Insurance Market in 2023
The cannabis insurance market has changed significantly in recent times. Insurance providers adjust their plans to cater to the evolving needs and challenges of the sector. Limited insurance carriers mean challenges for cannabis property insurance. Fewer carriers offer coverage due to the 2018 Farm Bill stagnation and slow legalization in some states.
General liability insurance remains more accessible. Many policies now exclude cannabis synthetics due to their production processes. Brokers must distinguish between various cannabinoids to provide appropriate coverage.
Cannabis risks often fall under nutraceutical product forms, which differ from cannabis policy forms in cost and terms. Cannabis market prices are declining, especially in pioneering western states, due to oversupply and operational efficiency demands. Let’s go over some bullet points from a recent study for 2023:
Rates
- Cannabis property insurance rates are expected to remain stable in the coming months.
- Taxation rates in California make illegal markets more appealing and push up rates.
- “License stacking” in California results in more cannabis than can be legally sold, increasing competition with illegal shops.
Underwriting and Coverage
- More carriers are entering the cannabis sector, but some avoid specific lines.
- Newer MGAs focus on smaller businesses.
- Most cannabis programs provide coverage of $20-$25 million per location, with a few offering up to $45 million.
- Carriers are becoming stricter about lighting for cultivation due to increasing claims.
- Protective features like hardwired smoke detectors and fire suppression systems are now commonly required in policies.
- Equipment breakdown coverage is under pressure, with fewer programs offering it.
Liability and Risks
- As more states open up, carriers are becoming more competitive, with some revising their terms for products like vapes.
- Extreme weather events pose threats, leading to changes in property protection codes.
- Crime remains a concern, with increased rates for businesses in high-crime areas.
- There’s a spike in property claims related to lighting in cultivation and extraction. LED is favored over HPS due to fire risks.
- Insurers face challenges with vague state laws around CBD, leading to tough claim scenarios. Misleading product labels also cause increased claims.
Additional Coverage Trends
- In a challenging profit scenario, many businesses sideline D&O, cyber, and EPLI coverages.
- D&O coverage is seeing a positive trend with reduced premiums.
- Most cannabis businesses skip cyber insurance despite its importance.
- The need for EPLI in the cannabis sector grows, especially with the industry’s reliance on hourly employees.
Achieving Success in Cannabis Insurance
Expertise in cannabis insurance is still rare. Cover Cannabis focuses exclusively on the cannabis industry, ensuring deep understanding.
- Brokers should help cannabis businesses comprehend their insurance in detail, considering risks and needs.
- The maturing cannabis market will likely see insurance providers enhancing their offerings as more states move towards legalization.
