A recent public webinar from Insurance Journal brought together a panel of industry experts — Phil Skaggs of AAIS, Alan Devey of Lokton, and Charles Pyrfrom of Canngen — to discuss current insights on cannabis insurance marketplace. Here are some of the valuable insights gleaned from what was a free-wheeling discussion:
- Everyone agrees that cannabis represents a tremendous growth opportunity for insurance carriers. The industry continues to set new records, and with all the states that have passed legislation and the others with legislation pending, there is no chance the country will reverse direction.
- It is not too late for insurance brokers not among the first boots on the ground to enter the arena. Those whose businesses has been eroded as restaurants, bars and other venues have closed due to COVID can take comfort that cannabis is now expanding at a fast clip and contributing to the greater good as people have access to tested-safe products.
- Right now there are too many SPACs chasing not enough public-ready companies, so the industry is viewing the M&A area as highly risky. Once a company gets a ticker symbol, it has a target on its back.
- While there is hope for broader policies with more reasonable rates, they won’t happen overnight. The industry giants are still skittish over cannabis, and product liability remains a scary area for underwriters — especially with questions over long-term use, health hazard exclusions, and the need for warnings on packages for newer users such as “don’t eat the whole chocolate bar.” In addition, COVID makes this not a good time to file new programs in some states.
- Cannabis is an area with many entrepreneurial companies and younger leaders not used to working with legacy carriers, so insuretech companies may have opportunities if they can handle the specific risks. One-click underwriting through an online portal may not coexist with being able to pay at claims time.
- Never forget that cannabis is local; regulations are different across jurisdictions, states have different coverage requirements, and you can’t claim to be a SME without knowing the area infrastructure.
- D&O insurance is one of today’s biggest thorns because of a lack of capacity. Cannabis companies are growing bigger than ever and taking on experienced, pedigreed board members who are expecting the same amount of protection they’re used to from consumer packaged goods and other industries. Today, that’s just not affordable.
- Everyone is hopeful that the CLAIM Act will be passed, removing the biggest excuses large carriers have for not getting into the cannabis space. However, if the Act is passed tomorrow, they do not see legacy carriers moving any more quickly than 6 to 12 months out due to the substantial learning curve they will have.
- The most underserved opportunity are those clients who fall into insurance purgatory: they’re cannabis-adjacent, not touching flower but serving companies who do like dispensary point of sale providers. Underwriters treat them unfairly, often misinterpreting cannabis leaves on their websites as signs of risky businesses.
- The top prediction for next year is a record level of M&A. It’s happening not just on the large operator level but also interstate. And it’s adding a new element of risk to those brokers chasing dispensary business: you can pursue a dispensary for months and just as they’re ready to sign, they’re acquired.