Cannabis operations are often complex business structures. Many cannabis operators create very unusual business models due to tax treatment and federal legalities. These kinds of businesses frequently have numerous named insureds and corporate entities.
It can be very difficult for retail agents looking for brokers or carriers to work with to find sources that are aware of the specific risks related to the cannabis industry. There are many complexities that present themselves in the cannabis extraction process. Working with industry experts who comprehend the dangers and particular underwriting requirements of these kinds of operations is essential.
Knowledgable markets are hard to come by
The industry is still very new.
There aren’t many established actuarial tables and risk management profiles for cannabis operations that have been around for five or ten years because the industry is so new. As a result, there aren’t many best practices in the insurance industry or for a sector trying to develop its own standards for how the cannabis industry should develop in the future. Carriers and underwriters have been challenged by this.
The sales process can be exhausting.
When it comes to adding new business to the books, there is a rising level of sales fatigue in the cannabis industry. For instance, compared to the more conventional insurance products these business owners are used to, the products that brokers are selling are more expensive. They are typically more restrictive as well. Brokers must work harder during the brief window of opportunity in the sales process to maintain the interest of prospects and avoid selling solely on price.
It’s crucial for brokers to take a consultative approach or approach these businesses in a way that demonstrates a level of expertise that extends beyond the insurance product or service when marketing to cannabis operators. Insurance sales calls to cannabis operations occur daily. Brokers must stand out from the competition and provide the business with a benefit or something of value in order to be successful.
Not all policies are created equal
The language of a cannabis insurance policy is crucial in providing sufficient protection for businesses related to cannabis (CRBs). Regrettably, finding insurance that satisfies the industry’s particular needs can be difficult. The National Association of Insurance Commissioners (NAIC) claims that too many CRBs who obtain insurance leave with contracts that have coverage gaps and insufficient limits. The most significant risks that CRBs face are theft, general liability, and product liability, according to the NAIC’s Cannabis Working Group.
Brokers are attempting to broaden the scope of the coverages that their insureds have in the majority of other insurance markets by, for example, highlighting the importance of cyber and product liability. Unfortunately, they have to use their limited time with insureds in the cannabis insurance market just trying to reduce the gaps in their policies.
Kapnick offers insurance options for cannabis businesses of all sizes, regardless of how straightforward the placement or difficult the challenge may be. From dispensaries and growers to manufacturers and distributors, our specialists are aware of how to properly address exposures in the rapidly growing cannabis industry. Reach out to Adam today at [email protected] or 248-206-1371 to learn more.