Lurking behind the scenes of the legal cannabis business industry is an issue so impactful, yet so basic, that many are wondering why it’s not being addressed. That issue is business insurance. Cannabis insurance is essential for dispensaries and cannabusinesses. Yet many are not prepared and run the risk of their business tanking in the future.
Some businesses are getting gouged by unregulated prices, while others may have incomplete coverage with their policies. Many cannabis businesses don’t have any form of insurance at all. Overall, the consensus across the board is that cannabis businesses lack options when it comes to cannabis insurance.
Cannabis business insurance can provide cannabusiness owners with protection from:
- Property issues
- Inventory loss and corresponding loss of revenue
- Disaster loss (the 2017 California wildfires resulted in much lost revenue)
- Liability issues
- Equipment and plant damage/loss (especially important for growers)
So what’s the deal? If it’s so important, why are cannabis businesses getting the short stick when it comes to insurance? Our first-hand experience working with dispensaries and collectives has prompted us to call attention to this issue. We want to make sure cannabusinesses don’t get left in the dark when it comes to basic business practices.
Here are a few key reasons why the cannabis insurance industry is problematic, and what cannabis business owners can do to protect themselves:
Insurance Concerns for the Cannabis Industry
The complaints regarding cannabis insurance have been pretty consistent for a while now:
- Premiums have been outlandishly high
- Existing coverage policies for businesses have major gaps
- Too many unscrupulous insurance brokers and agencies are looking to make a quick buck
- Cannabis businesses often have few insurance options to choose from
- Insurance companies don’t fully understand the needs or nature of cannabis businesses
In particular, most insurance companies aren’t in touch with the ground-level needs of cannabis dispensaries, growers, suppliers, and other important links in the supply chain. For example, they might not understand the full implications and technical details regarding the way that mold can affect a cannabis crop, or what the risks involved in transporting products are. This can lead to inaccurate assessments of losses and other similar issues.
Part of the problem also lies in the way that cannabis business insurance systems are set up from state to state. For instance, California has approximately 25 surplus lines carriers, which are non-admitted, and zero “admitted” carriers.
“Non-admitted” insurance carriers are often not approved by state insurance departments and may not always necessarily follow state insurance requirements. Also, in the event of insolvency, there is no real guarantee that claims will be paid with non-admitted insurance carriers.
In California, non-admitted carriers are indeed regulated by the state Surplus Lines office; however, regulation is far less thorough than for the admitted market, and rates are largely unmonitored. This means that non-admitted carriers in California are charging whatever they want.
Are you experiencing snags in your cannabis business operations?
Benefits of Working with an Admitted Cannabis Insurance Company
In comparison, admitted cannabis insurance carriers in California offer several benefits to cannabis business and dispensary owners:
- Submitted rates need to be approved by the California Department of Insurance; this helps keep track of industry costs and allows claims to be recalculated quickly
- No rate hikes are allowed without prior approval by the Department of Insurance
- Premiums paid and claims made can be backed by the state guaranty fund if the insurance company goes bankrupt or is unable to pay claims due to losses
Part of the solution lies in allowing for more admitted carriers, which lets cannabis business owners deal with more insurance providers that are regulated and subject to industry-wide standards.
It’s clear that admitted cannabis insurance companies are the way to go. At the moment, they’re too few and far between, but the efforts of a key California insurance company may change all that soon.
Golden Bear Insurance Company Becomes California’s First Admitted Carrier
On January 1, 2018, Golden Bear Insurance Company became California’s first ever admitted cannabis insurance carrier. This momentous occasion marks the beginning of a new era for cannabis business owners. It also dovetails nicely with the passage of legal recreational cannabis in California.
Golden Bear Insurance Company will be offering General Liability applications for:
- Retail Sales Cannabis
- Cultivation of Cannabis
- Manufacturing of Cannabis
In addition, Golden Bear Insurance will be employing a special class code that narrows identifiable risks.
For information pertaining to cannabis insurance and Golden Bear Insurance Company, please contact Superior Commercial Insurance at 818-821-2309.
Get the Cannabis Business Guidance You Need
We believe that resources like insurance, which are standard for any other business, should also be available to dispensaries and cannabis businesses without issue. There is much to be gained by improving the current insurance situation for the benefit of cannabusiness owners and entrepreneurs. Contact us to learn how to grow your business using power marketing strategies, sound cannabis business guidance, and other tailored services.