Insurance Options for the Cannabis and Hemp Industry

EA:
Wayne, how did HUB get into this market?
WM:So as you said, HUB is a top five insurance broker, and we have special teams that spend a lot of their time working in the special teams. So things like transportation, construction, health care, real estate, hospitality, agribusiness and food, financial institutions, entertainment and sports, not just educational benefits, electronic technology, and the reason we’re talking today, cannabis. But more specifically to your question, about 10 years ago, one of the cannabis producers on the west coast had a parent who was sick and herbal medicine didn’t help the parents very much. So he started using marijuana as an alternative. Well, the manufacturer saw^A manufacturer in the insurance world means an insurance broker or an insurance salesman, just to be clear, when I used the word manufacturer. So the developer had a vision for cannabis businesses to register slowly. And so they started identifying carriers that they could write on behalf of, and they offered to help create the insurance. So HUB was and continues to be more than just selling insurance, but we are partners with the shipping companies and we help create and underwrite those policies. And as the sector matures and changes in compliance, we will continue to work with them.
EA:Why is insurance for the cannabis industry so difficult?
WM:So when people ask me that, I say, it depends on who you talk to. For me, it’s not difficult. Cannabis is like any other business, and it is important to work with a professional. You don’t go to a hardware store to ask about meat prices, and the same is true, you don’t go to a salesperson, an insurance broker, to get advice on marijuana insurance. So many farm insurance salespeople or street corner insurance salespeople don’t know where to look for coverage for cannabis companies. And in addition to this, there are several types of cannabis systems. Therefore, the expert must be a reliable friend. There are growers, manufacturers, processors, distributors, testing labs, delivery, dispensaries, resorts, cannabis-friendly events, hotels, restaurants, international operators, similar, business investors, and there are probably a few others, but I had to . breathe.

And each of them has some risks. There is a special presentation for each job. HUB provides risk management, insurance and insurance solutions to more than 700 cannabis organizations in the US and Canada. For us, we know the right questions and different groups. We have created a system and process to simplify as much as possible, in which we learn about the activities of each organization, create referrals, attract the attention of writers, and ensure as much as possible, they provide the best value. I am part of a group of 200 members that focuses on cannabis related businesses.

Now, back to the work I mentioned, well, it’s a detailed plan and we have to provide our work with the right programs and work together with insurance, we make a risk management plan to know what is the need to insure.

When we give our opinion, we tell them more than what they think they want. We present what we consider to be the risks, and then they decide whether or not to purchase insurance so that in the event of a claim, they are protected by an attorney. And if payment is required, the payment is made to the limits of the policy. And they can also decide if they feel it is not a risk they need to insure. And they do what is called self-insurance. But if interest does occur, then they need to hire an independent attorney. And, as you know, it’s an expensive job.
EA:Is a hemp insurance or CBD company different from a cannabis company?
WM:We, we do everything here at HUB, and we say hemp is hemp and hemp is hemp. And the real difference is that hemp is classified as something with less than 0.3 THC, with THC being the component that produces the buzz. So if you want to grow, extract, sell, make hemp or hemp byproducts, such as gummies, oils, bombs, tinctures, powders. Hemp establishments, like cannabis establishments, require licenses issued by the government. In the insurance markets, they are very similar entities. We just need to clarify what they have to prove.
EA:What is the biggest part of the cannabis industry as far as insurance goes?
WM:It depends on the type of business the organization is in. Whether it’s a dispensary, or a grower, a drag as we said before, but in my opinion, the biggest exposure is the exposure of the product problem, because everyone up and down in the retail industry needs to have product control. And I think, in the next question, I can go deeper into what is covered.
EA:Is the market different in New York, different from New Jersey or California or Colorado?
WM:Our take until the markets have the same legal parameters, that’s a big difference. And I’m actually talking about, for the most part, dispensaries. So whether it is medicine or entertainment, and there will be some countries where there is no level of legislation. For us from an insurance point of view, they are the same. They are in the same group.
EA:What is the biggest challenge an underwriter faces when trying to stake a claim in this area?
WM:Policy limits are the main problem. So if you’re thinking about startups, small growers, dispensaries that are just starting out, what’s going to happen in New York and New Jersey. The limits they need can drive it, but when all the licenses are available, and instead of being like in New York where you can grow one acre of outdoor crops or a certain number of indoor plants, when they start growing 50, 500 or thousands of acres, that’s going to be a mess. more concern and how to know how to give a higher margin. An acre you can get, depending on how big it is, you can get anywhere from 4 to 8 million dollars from an acre. All the stars must align. So imagine what 5,500 or a thousand. Are carriers willing to jump in and provide 50 million, a hundred million, 500 million if a loss occurs? Well, there are ways to do that.
EA:Are these things that these companies are taking a big risk in?
WM:A little bit. Management, compliance, risk management, which many of the less mature sectors ignore. So I’m talking about things like safety and program training, operational risk assessment and site safety, operational safety, fleet and equipment safety, program development, operator response programs, emergency response and business continuity planning, safety and workplace violence. , cyber risk management and information, security services, reporting and announcements, announcements, analysis of losses and trends, and personnel management, all things that the strict sectors have groups of people who look after. We not only advise and help develop these programs, but we can also try to get the C-suite to learn about it and know what to do when something happens. Imagine a hack where if someone thinks they’ve been hacked and their computer freezes someone looks left and right, who do I call? What should I do? That’s why we create a program to help them with this, as well as with all these other things.
EA:You talked about how the industry is growing. What other changes have taken place in the past few years as the industry has grown?
WM:More and more countries go beyond legalization at different levels. Insurance carriers who write in places are offering higher limits, better conditions and their policies, but things like investing in cannabis stocks, I am not a financial advisor. It is like any other currency. There are dangers. And it’s a bit of a rough ride. There has been incredible growth and incredible downsizing. So I think this will be good, because I think big players will enter the market. I hope the big pharmaceutical companies get in on it. I believe in food and drink. I believe that tobacco will enter these places. So they will push the direction of this market.
EA:Currently, cannabis is listed as a single drug. How will the insurance landscape change if cannabis is changed?
WM:So I’m very interested to see what happens, but if it deschedules more insurance carriers will enter the space, they will provide good terms and conditions, but it is important that the expert be a reliable partner because each insurance policy. written by each carrier’s attorneys. And one of the most important things that ordinary people don’t do, is to look at the first few pages, which are the announcement pages, which say the period of the policy, what are the limits, and what are the broadcasts, but they don’t look at the most important part, which is what is not included. And that could be, you’re just buying the policy that you think is right for you. And the things that can happen to your organization are things that are not included. Well, you don’t want that to happen.
EA:Yes. At the moment, as we talked about cannabis as a medicine, the government has allowed countries to make their own policies regarding cannabis. So, Wayne, my last question to you is do you see the legalization of cannabis sooner or later?
WM:I think the rules and regulations will change a lot every day with each state having their own regulatory boards, opening up different areas and sectors of the canna business. Every time he admits something, he hears from the panel and finds out, “Oh, we didn’t really think about what the ramifications are.” So there is no crystal ball, but there will be constant change, I think, even in the early years of federal law.
EA:Well, thanks for joining me today, Wayne, and thanks for listening to CannaCast as part of the EisnerAmper podcast series. Visit EisnerAmper.com/cannabis for more information and podcasts. Join us by following and we’ll be hosting a podcast where we’ll discuss some of the upcoming events.

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