The market tends to love underdogs, and as we enter 2021 the cannabis industry is occupying this pivotal position. It’s still underappreciated by many traditionalists: the stigma of cannabis is gradually eroding, but it’s still present, and many underwriters continue to be put off by involvement. And it’s underserved: having a lack of competing carriers keeps rates high than they should be, especially considering that the safety standards and theft protection measures found in newly-built cannabis facilities actually make them much better risks than your average convenience store, car repair shop or neighborhood restaurant.
In fact, a rational look at the numbers shows the cannabis marketplace to be severely undeveloped. 2020 set a new record for industry sales, estimated to total up between $18 and $21.6 billion. Of course, the pandemic made its own contribution, as many consumers used money they would have spent on outside-the-home entertainment to purchasing cannabis. But even as 2021 opens up, this growth should repeat itself because of the five new states that have come on board with legalization.
This of course means that current cannabis policyholders will likely need more coverage. Many operators who are expanding into new regions and/or neighboring states will be shopping for additional protection, as will be cannabis businesses that choose to expand horizontally or vertically — more dispensaries, owned processing facilities, handling their own distribution, or perhaps all three.
And while most states do have some sorts of programs to favor small operators, the reality is that cannabis is becoming the province of large multi-state operators, whose big box stores co-exist with boutique and locally-focused stores. These multi-million dollar companies are no strangers to risk management, and are likely to quickly accept the premium that cannabis businesses must pay for adequate coverage — especially for locations with a high TIV.
There is also a substantial need for insurance to cover the burgeoning number of new employees to the industry. Some forecasters have predicted that within this decade, cannabis will create the largest workforce mobilization of the past century. This will drive growth in areas of insurance such as worker’s compensation and general liability.
All of this is playing out in an atmosphere of kinder times ahead in Washington. With the Democratic Party now in control of both Houses of Congress as well as the Executive Branch, 2021 may see passage of the Safe Banking Act and the MORE Act. Should the industry receive tangible banking reform, long-awaited deschedulization, or both, it will be full speed ahead for both 2021 and the entire decade to come.