The US cannabis business is growing rather fast in demand and supply, with the industry forecasted to be worth $146.4 billion by 2025. However, as more players and enterprises join the industry, there are numerous challenges for CBD insurance providers and clients. The strict regulatory environment for cannabis do businesses in the sector high-risk clients for most insurers. Read on for more about challenges for insuring CBD enterprises.
To help navigate applicable tax regimes and federal regulations, most cannabis operators have set up unique and complex business structures. A typical enterprise may comprise several companies with multiple named insureds.
Sometimes, retail agents are unable to access the right products for the unique risks their clients in the cannabis industry face. A major challenge for them is finding sources with a proper grasp of the specific risks associated with operating cannabis businesses.
There are inadequate actuarial data and risk management profiles for cannabis enterprises that have existed since five or ten years ago. The industry is new, and this inadequacy makes it difficult to develop best practices that insurance underwriters and carriers can follow.
One of the persistent challenges for CBD insurance brokers is that it’s not easy to close deals. The cannabis policies they sell generally cost more than the insurance solutions many prospects have traditionally had. So, most cannabis operators lose interest quickly along the sales process.
The National Association of Insurance Commissioners (NAIC) reported that many cannabis-related businesses (CRBs) do not get sufficient coverage for the unique risks associated with their operations.
Here are some tips to overcome challenges for CBD insurance placement:
Engage a wholesaler that’s an industry expert: A knowledgeable wholesale provider understands the standard policies and coverages for cannabis operations. They can share that knowledge and help you learn to make the most of the limited coverage options in the marketplace.
Know your prospects really well: Some legacy cannabis operators require a lot of persuasions to appreciate the need for coverage. Understanding the business acumen of prospective clients enables you to strategize and customize your sales pitch.
Keep an eye out for coverage gaps: Brokers and agents should scrutinize policies for exclusions like assault and battery, low-risk health hazards, and vaping-related products.
Cannabis operators, from dispensaries and cultivators to hemp manufacturers and testing laboratories face various unique and general risks. Here are some of the CBD insurance solutions available to them:
General liability: Every cannabis business should have this policy for protection against injury and property damage claims and lawsuits.
Commercial property insurance: Every cannabis operator owns business property, such as CBD products, which may be lost or damaged in a fire, theft, or natural disaster.
Product liability coverage: This policy protects CBD product sellers and producers when a customer falls ill or is hurt as a result of using their product.
Workers compensation: Employers in CRBs should get this policy to cover their workers’ on-the-job injuries or illnesses.
Crop coverage: Cannabis manufacturers could use this policy in case of crop failure.
Errors & omissions: Professional liability coverage is available to cannabis operators, including testing labs.
Business income coverage: This policy covers cannabis operators for lost profit and bills if a covered event interrupts their business operations.
CBD business is filled with risks and legal limitations. However, you can overcome all these challenges with the right insurance. Contact our insurance experts at Graystone Insurance, and we will find the right coverage plan for your cannabis business.