Thanks to California’s insurance commissioner and California Mutual Insurance Company, the commercial cannabis sector has another insurance option. Landlords renting property to cannabis businesses now have Lessor’s Risk coverage, intended for property owners exposed to risks tied to cannabis-related business activities of their commercial tenants.
As the market for cannabis insurance and regulations of the commodity continue to settle out, some experts already active in the space recommend insurers look at price.
“When you look at it from an insurance perspective, I think the entire thing needs to be structure around the price of the commodity,” said Hunter Garth, managing director of Iron Protection Group and a speaker at the upcoming Cannabis Cover event – a multi-city masterclass in May with upcoming stops in Los Angeles and Las Vegas. “It’s literally the lifeblood of every single business that comes in, including ancillary businesses like mine.”
The traditional ways of doing business in insurance aren’t going to fly for the cannabis industry, explained Garth.
“I think insurance has to come in here, into the space, and look at it from a non-traditional way and understand that the economics are moving so rapidly and changing so rapidly that they have to be willing to be as nimble as every other company in the space,” he told Insurance Business.
Drawing comparisons to other legal businesses as a way of learning how the cannabis market and insurance for it will play out is futile.
“Ultimately, you have all these traditional industries where business plans make sense. You can put together a business plan, you can look at insurance as a line item, and it just becomes part of the everyday activity of operating a business,” said Garth.
“In cannabis, because of the discussion of price compression and regulation, the insurance companies have to understand that they will not be treated as an everyday item. They’re consistently going to be priced out, they’re consistently going to look for a higher level of service, they're going to be consistently tested for their ability to pay out insurance claims – and that’s a big deal.”
And whether the feds finally decide for the legality of marijuana or against it, the landscape of cannabis regulations will still have to be determined by states.
“Even if the federal government came forward and said, ‘we’re going to fully legalize it,’ unless it was a free market, each state is still going to be responsible for implementing their own purpose. As that happens, everyone’s still fearful – no one really knows what this looks like. Even with five years of data, we still don’t really know how this shakes out.”
Hunter Garth will be speaking on a panel about innovations in underwriting and the provider perspective at the Cannabis Cover event being held on May 15 and 31 in Las Vegas and Los Angeles. Click here for more details and to register.