Takeaways from Our Conversation on Insuring Magic Mushrooms

April 6, 2023 by Don Jergler

Magic mushrooms are a class of drugs in a promising industry referred to broadly as psychedelics, a market that some believe will reach more than $8 billion in the next few years.

Like cannabis, they are considered controlled substances. So, they’re federally illegal, but states like Oregon and Colorado are creating regulated markets.

And there’s enough promise in psychedelics to pique the interest of a few early adopter cannabis insurance specialists.

For our latest podcast we spoke with Tyler Cline, a third-generation broker who owns Cannabis Business Insurance and Psyched Insurance, and Jodi Green, an attorney who represents cannabis businesses and executive director of the Women in Psychedelics Network.

Following are takeaways from that conversation.

Green, who formerly represented insurers and brokers, said she’s heard from a number of insurance professionals who are interested into getting into insuring psychedelics.

“Yes, there are some brokers that see it as worth the risk of jumping into a new industry. And I think carriers in large part are on the same sort of fence, some of them are going to be the first movers and they view it as worth putting the time and energy into this and playing the long game, if you will, to help this industry grow,” Green said. “Others are more risk averse and prefer to take the wait and see approach. But I’m excited to be on the forefront of this, and trying to create solutions before it’s too late.”

Beside the states of Oregon and Colorado, Green counts at least 15 cities in the U.S. that have decriminalized psychedelics in some form, including mushrooms.

The puts psychedelics on a similar trajectory as cannabis, which remains federally illegal, while states and cities across the country create rules and regulatory structures for cannabis use and sales.

“It often starts with a grassroots movement of decriminalization, which then proceeds into legalization in some form,” Green said. “I’ll also caveat that it’s going to be different from cannabis. Certainly, to begin with, the two states, Oregon and Colorado that have created a commercial structure for this, are making it available only in licensed centers or clinics. So it won’t be like cannabis in a dispensary model where you can go to a retail store and just purchase some mushrooms and bring them home and have a good time.”

Cline saw the potential in insuring psychedelics, and he wanted to be ahead of the brokers he knows are already gearing up to enter the space. His knowledge of psychedelics and mushrooms is as vast as his enthusiasm for this promising area of business.

Cline sees potential in both medical mushrooms – or what he calls “the psilocybin wave” – and the recreational market through Amanita muscaria mushrooms, which have a wide range of psychoactive effects.

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“It’s very hard to depict which has more potential here because they both have great potential,” Cline said. “I would say the immediate potential right now is the recreational market that’s already existing through Amanita muscaria, where we’re picking up insurance on these product types nationally in every state except for Louisiana, because of legality (issues) with that state.”

Cline, who’s headquartered in Colorado, views medical as being far behind, despite the establishment of a medical structure for mushrooms in Colorado and Oregon.

“You know, we’re still a year out from setting up medical access and facilities here in the state,” he said. “So, I’d say the immediate recreational market through Amanita is going to be a little more impactful from an insurability perspective, then the psilocybin mushrooms that will reside with the medicinal approaches.”

These mushrooms and psychedelics are, of course, not without risk.

“I mean the biggest risk that we can all think of is at the forefront. Somebody consumes too much product, they have a psychotic episode, or have a freak out in the state of mind and that causes loss to themselves or others,” Cline said. “So, just like within cannabis, we’re going to probably see a lot of these same exclusions for impairment, so the carriers on paper will insure it, but when it comes to the adverse effects, these policy languages really try to rhetorically defend policy at the carrier level to prevent the most practical losses – really the user negligence.”

To abate that risk the fledgling industry is doing a lot of testing and analyzing to figure out recommended dosages and other risk management tools, he added.

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