The insurance industry is about to explode with cannabis legalization.
As Congress inches closer to legalizing cannabis at the federal level, companies are bracing themselves for what could be as big as a ten-fold increase in sales as part of the booming $17.6 billion-a-year market.
To date 36 U.S. states and the District of Columbia legalizing cannabis for medical or recreational us. All the while, insurance for growers, testing labs and retailers remains an issue in limbo. This is largely because strict federal laws criminalize pot alongside heroin, LSD and methamphetamine.
Just last year, U.S. legal cannabis sales jumped 45%. Reuters reported that they are expected to hit $41 billion in 2026.
The industry insured $250 million in policies with a few companies only offering property and liability coverage, according to figures obtained by the agency.
U.S. businesses that produce and sell cannabis are unable to acquire insurance coverages due to federal laws: crops get stolen, testing is expensive and the limits on payouts are inadequate. The cannabis industry is already a hot sector, and by some estimates has already caught fire. Legal cannabis sales in the U.S. increased to $1 billion in 2016, while investment banks are poured money into cannabis companies. That market saw a nearly 20-fold increase as mentioned above.
A cannabis business’ inability to secure coverage may well result in missed opportunities and higher operating costs. Some cannabis companies are opting out of a permit or a license in order to avoid costly requirements like that of having adequate security measures. In cannabis legalization states, small businesses could face larger operating expenses than expected due to gaps in insurance coverages.
The cannabis industry is highly susceptible to property crime because cannabis can easily be sold on the black market – something that can be cured by legalization.
The Space Has an Enormous Need
Some insurers are beginning to offer new types of coverage to producers, testers and retailers in states where cannabis is legal. If Congress takes action to decriminalize federal laws on marijuana sales, this would open the market for these companies and also provide even broader protections.
Rocco Petrilli, in a story reported by Reuters said, “There is an overwhelming need for the right kinds of insurance. ” Petrelli is the chairman of the National Cannabis Risk Management Association (NCRMA). The association is a trade group, consisting of 3,000 businesses across the cannabis industry.
According to the Reuters reporting, the association (NCRMA) has also established a captive insurer to provide property, general premises liability and product liability coverage for retail members. They also plan to introduce workers’ compensation and auto coverage. This means it will offer coverage exclusively for NCRMA members that are tailored to their needs.
New marijuana policies are needed soon, because cannabis business owners say that it is difficult to find insurance coverage and the cost is high. Dispensary owners told Reuters, for example, that premiums are 20% to 30% more expensive than normal retailers would pay. Some vehicle coverage types can also cost 4 or 5 times as much.
The Push for Legalization
As more and more states make marijuana legal, pressures are increasing on federal lawmakers to follow suit. Last month, Senate Majority Leader Chuck Schumer announced an ambitious plan to fully legalize cannabis, using his position as Senate Majority Leader to support the movement. read more
Recent House legislation has provided banks the opportunity to provide financial services to legal cannabis companies. The Senate bill is unlikely to pass because of the narrowest of majorities.
Analysts and insurance industry executives still say these types of bills show that Congress is slowly making their way toward more effective cannabis laws.
BDSA is optimistic federal legalization will happen by 2022, which Petrilli of NCRMA says would generate $3 billion in the insurance industry alone. This is under the expectation that those in the industry would be covered just like any other “normal” business.
The trail blazers who offer reasonably priced insurance coverage at the necessary coverage levels is going to have an unimaginable head start and see enormous success.
Bud’s Place is right on track with all of these market changes. To find out more about a franchise with us, find the info here and then contact us!