Theft remains by far the biggest concern for both marijuana and hemp businesses in the United States. The nature of the product and its popularity on the black market make it a prime target for petty and organized crime. This is painfully clear in cannabis insurance claims data, which has been dominated by theft-related issues thus far.
“About 90% of the theft claims I’ve seen in the cannabis insurance space have been an internal problem,” said Chris Boden (pictured), cannabis practice group team leader at Crouse and Associates Insurance Services, a California-based wholesale insurance broker. “Oftentimes, a theft or a robbery occurs right after the cultivation harvest is complete, the product is dried and cured, and it’s just about to be transferred to the wholesaler. This suggests an inside job, because they knew exactly when to come, exactly what to do, and exactly where the product is being held.”
“I saw one claim where the insured was upgrading their property, so they had to take out all of their equipment and put it into storage. The storage containers were locked and alarmed, and there were security guards on the premises,” Boden added. “About eight to 10 people, who knew exactly when the security guards went on break, busted through the fence, went straight to the storage containers, cut the locks, and boom – they were gone in 10 minutes having stolen over $1 million in product. It’s hard to confirm, but that very much seems to be an inside job because they knew the guards’ schedules and they knew exactly where the product was.”
Cannabis businesses can have every protection in place, but that won’t necessarily help against an inside theft job. That’s why it’s vitally important to have the right insurance protection in place and with adequate limits, according to Boden.
“I know an example of two [cannabis business] insureds at two very different locations. One was a bank prior to them moving in, so it had vaults and high security. It looked impenetrable. The other insured was a normal strip mall location, which seemed to me to be the higher risk option of the two. But it was the former bank location that suffered the robbery,” Boden told Insurance Business. “Even I thought it was impenetrable; it looked like the perfect scenario for an insurance company. Luckily, the business was properly insured. They had the right limits and they got reimbursed for their loss. That’s why it’s so important to have the right coverage. I don’t care who you are, if you lose $1 million worth of product, that’s a huge hit.”
When it comes to hemp businesses, there’s a common mindset that there’s little risk of theft. Some insureds think: ‘It’s just hemp. No-one’s going to bother stealing hemp. It’s not worth it.’ But that doesn’t mean they’re in the clear, as past claims would suggest. Hemp is regularly being mistaken for marijuana because of how similar the flowers look, which means hemp businesses are just as vulnerable to theft. As a result, lots of hemp cultivators, many of whom operate outdoors, are adopting new security measures and requesting insurance advice.