Takeaways from Talk About Regulators and Cannabis Insurance
There’s a shortage of carriers offering insurance to cannabis businesses in numerous states, causing these businesses to pay more for policies or go underinsured.
Regulators in several states are stepping in and putting some time and resources into encouraging more insurers to get into the business of insuring cannabis. States like California, Colorado, New Jersey and New York, are looking for ways to incentivize insurers to offer products and services to cannabis businesses.
In the latest Insuring Cannabis Podcast, we spoke to an insurance and legal matter expert and a regulator to find out what regulators are doing to encourage carriers to get into the market.
Following are some takeaways from that conversation.
The Colorado Division of Insurance is one regulatory body that’s throwing out the welcome mat. The division sponsored Colorado Cannabis Business Insurance Forum, a series of four virtual webinars.
The forum kicked off in April with a presentation by Colorado’s cannabis regulatory agency, the Marijuana Enforcement Division, to talk about the state’s regulatory structure.
They’ve also had presentations offering data from the state’s seed-to-sale tracking system, and panels on insurance products and forms.
Recordings of all the sessions from the forum are on the department’s website (doi.colorado.gov). Scroll over the top “Insurance Industry” pulldown menu at the top of the page, and then click on “Cannabis Business Insurance.”
“The intent behind the webinars is to bring together the insurance industry and the cannabis businesses,” said Brown, Colorado’s chief deputy insurance commissioner. “Because we understand that there is a need for insurance for cannabis businesses, and at this point the insurance industry has been a little reticent to jump in and provide coverage. What we have found is that there is coverage for cannabis in the excess and surplus lines market. But at this point we only have admitted carriers in Colorado providing coverage for very narrow single line aspects such as workers’ compensation.”
Former California Insurance Commissioner Dave Jones as far back as 2017 had encouraged more admitted market participation in cannabis, going so far as to say that the California Department of Insurance would “pretty much accept” any rates filed by insurers offering products to cannabis businesses.
Regulators have also been a bit more flexible in approving insurance forms for carriers, according to Phil Skaggs, assistant counsel for the American Association of Insurance Services, a national insurance advisory organization.
“It’s kind of an unofficial incentive that a lot of regulators apply, they’re anxious to see quality programs in their market,” Skaggs said. “So, during maybe like a pre-filing conference, that point will be expressed that ‘We’re going to review your forms, we’re going to review your rates, but the amount of scrutiny that we are placing on that review is not as much as it would be for an established program like homeowners or other business owners’ or something like that.”
Skaggs has been trying to spread the word within the industry about the potential in cannabis, and he has been speaking on this subject to insurance departments in a number of states.
He said regulators are doing more than just educating carriers on the cannabis space.
“Another area is addressing financial barriers,” Skaggs said. “There are financial incentives such as tax exemptions that they offer or lowering minimum financial requirements, reducing amounts that must be paid into state guarantee funds, et cetera. There’s operational barriers that can be removed by providing flexibility and controls that might apply in distribution channels or the content of disclosure notices, the availability of payment tools or electronic policies, various reporting mechanisms, or even claim settlement practices and audits.”
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