Those who own or work for marijuana-related businesses are having a tough time finding insurance. That’s because insurers are having a tough time getting a handle on the marijuana industry. There is no question that marijuana is growing (pardon our pun), so it represents new opportunity for insurers to grow their business, too. On the other hand, many still define the industry as “risky business.”
Health and life insurance companies have long considered skydiving, race car driving and similar pursuits as risky lifestyle behaviors. And so far, they are inclined to see association with marijuana in the same light. After all, marijuana use is still illegal under federal law, even if it has been legalized for medical and/or recreational purposes in some states. The feds regulate banks and other financial institutions as well as insurance companies, so there is good reason for insurers to consider this fundamental fact. Lloyd’s of London used it as a reason to discontinue policies in the industry.
And while the cannabis sector industry may be burgeoning, it’s still quite new. Insurers don’t have historical data on which to base underwriting decisions for health, life or business policies. Without fact-based information, many aren’t willing to broaden their portfolios to include pot businesses.
But is that unfair?
Many in the pot industry say yes. Difficulties on the financial front have made national news. Marijuana growers and dispensaries cannot obtain bank accounts, due to federal regulations, so they operate as a cash business. And there is a lot of cash involved. That’s causing some business insurers to consider the industry as risky when it comes to theft. Some employers say they’re even having trouble finding payroll companies willing to work with them.
Meanwhile, the head of the National Cannabis Industry Association says he had to speak to numerous companies before he found one willing to support a 401(k) retirement plan for his employees. His organization is a trade association – not directly involved with any aspect of growing or selling marijuana. But he says the mere fact that the word “cannabis” appears in his organization’s name was enough to turn off many firms.
When it comes to obtaining health insurance, experience is a mixed bag. Again, employers report they are having a difficult time locating insurers who are willing to provide health benefits for their employees. If they can find a company, some say they are charged higher rates than other types of businesses, again because of their “association” with marijuana. However, others say they are not paying higher-than-average premiums for their group health plan.
Aside from concerns about the industry in general, insurers are grappling with how to treat individual marijuana users. At the Association of Home Office Underwriters annual conference last year, attendees were asked how their companies view marijuana use when setting insurance rates. Their responses were interesting:
- 43% said the most important factor was frequency of use (compared to 37% who cited medical history)
- 43% said they consider smoking marijuana to be riskier than ingesting it (just 8% said ingesting it was riskier)
- Most have marijuana-related policies in place, and many of the rest said policies were in the works
On the life insurance front, one grower reported his application was turned down, even though it was a personal policy application that had nothing to do with his business. It’s that “association” thing again.
Moving forward
It seems clear that cannabis as an industry will continue to expand. More states are likely to legalize use, in some format, and more entrepreneurs will enter the business as producers or dispensers. Along with them, insurance companies will continue to pay close attention to the experience of companies who have already entered the marijuana arena and to the growing body of actual data they can use to make underwriting assessments.
