Cannabis sales in 2021 were $26 billion according to flowhub, and are expected to exceed $32 billion in 2022. The industry supports more than 400,000 jobs. New Frontier Data estimates that the value of the industry could exceed $57 billion by 2030. That is the largest growth in the industry that is not regulated at the federal level.
According to the National Conference of State Legislatures, medical marijuana is legal in 37 states, three territories and Washington, DC Recreational or non-medical marijuana is legal in 19 states, Washington, DC, and two territories.
Charles Pyfrom is the director of marketing for CannGen Insurance Services in California, which provides all types of insurance to growers, retailers, laboratories, processors and harvesters, as well as transporters, manufacturers, dispensaries and marijuana, hemp and CBD-related businesses. He has served on the company’s board of directors since 2017, and oversees CannGen’s relationship with the broker, overseeing the development of their program and long-term underwriting strategies. With over 14 years of experience in the insurance industry, he understands the risks and requirements of securing a diverse business.
PropertyCasualty360.com asked him to explain what he’s seeing in the industry, how pending legislation could affect insurance companies, banks and cannabis companies, and about the risks businesses often overlook.
PC360: Since dispensaries are expensive businesses, what security challenges do they face, and how can they be addressed? What are some of the risk factors or strategies that you should consider?
Pyfrom: Theft and theft are a serious problem among dispensaries in legal markets. CannGen requires its customers to keep all their money in a safe place to protect this. In addition, we recommend that businesses have strong security protocols, whether they be staff or security to monitor their premises. It is important that dispensaries also protect themselves from interest.
PC360: What types of insurance should dispensaries purchase to protect their business and employees? What are the factors that make a business have the right margin to offer a business?
Pyfrom: While we believe that dispensary requirements vary from business to business, some of the provisions include inventory control, workers’ compensation, property, general liability, transportation, and in some cases, especially with larger dispensaries, management responsibilities.
There are various factors that help determine the margin of safety including what a business is doing and the size of their business. In the beginning, it was difficult for us to know how many cannabis businesses needed, mainly because it is a new legal business to have insurance needs, but after working with other officials working in many cannabis states. With nearly 10,000 cannabis businesses in the US, we have a clear picture of what the boundaries are.
Also, many states where cannabis is legal require businesses of this type to meet minimum insurance limits.
PC360: What questions should they ask a broker or agent to make sure they are aware of the risks that cannabis businesses face?
Pyfrom: In addition to questions about the risks that their business faces, dispensary owners should ask their agent about any risks related to the location and / or the requirements of the government. They should also discuss how their margins will grow as the business grows and how coverage will change as new cannabis laws and regulations come into effect.
PC360: Are most carriers offering support now? Is insurance coverage easy to get, or is it still difficult since cannabis is illegal at the federal level?
Pyfrom: It is not difficult for cannabis companies to get insurance, but it is difficult for them to find a carrier that gives them everything they need in one place. Many cannabis businesses have to use multiple agents to ensure the safety of their money, assets, property and employees.
We were the first Managing General Underwriter (MGU) to focus on the legal cannabis industry and we are the only one that offers everything a dispensary or other cannabis business needs to comply with the full security.
PC360: If the SAFE Banking Act passes, what protections will it provide for cannabis businesses in the short and long term?
Pyfrom: The SAFE Banking Act has the power to make positive changes in the cannabis industry and can reduce the risk of theft and make it safer for cannabis businesses themselves.
Allowing legal professionals to have access to the banking and credit they need – just like other traditional companies – will not only help existing businesses but encourage new players, big and small, to jump into the market. Our goal is to ensure that all these companies, regardless of their size, are safe and secure.
PC360: Are there any mistakes you see dispensaries making in their risk assessment? What role does a strong risk management plan play in helping cannabis businesses secure insurance?
Pyfrom: Risk management is the most important factor in helping cannabis businesses get support. Make sure the insurance agent knows the nature of your business. If you don’t, and the insurance provider learns that you work with cannabis after the claim is filed, they may not honor your policy.
Having comprehensive insurance as part of their insurance policy protects their property against lawsuits and ensures they have the necessary cash to keep their business afloat. Property insurance includes cash, valuables, hardware and machinery, property, and even the personal effects of employees and guests.
But what most dispensary owners don’t consider is the risk associated with their employees. Just like any other business, dispensaries need to make sure their employees are covered in case of any type of accident. Earlier this year, CannGen announced that we are now offering reduced staffing rates so that businesses of all sizes can take advantage of this opportunity.
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