The cannabis industry is expected to grow by $146.4 billion by 2025. There is no question about the increasing popularity of cannabis in the United States since 33 districts have legalized the use of cannabis. Some states have not legalized cannabis, but they allow the use of some byproducts of cannabis, like CBD oil.
However, cannabis is still in a gray zone, and because of that, it cannot enjoy the same legal and financial benefits as other industries such as health care.
Regulated Cannabis Business Insurance
The cannabis industry has high risk, which makes insuring it difficult. Like every other industry, cannabis businesses also have workers, assets, and business infrastructure, but there are more barriers to getting insurance for marijuana dispensaries.
The federal law does not support cannabis use; therefore, it is a massive barrier to getting adequate insurance coverage for dispensaries. Additionally, insurance companies are constantly fearful of getting involved in illegal contracts or violating public policies.
Risk Involved In Insuring Cannabis Businesses
There are many significant risks involved in insuring cannabis for insurance companies. Let’s explore some in further detail:
1. Federal Laws Make It Difficult To Insure Cannabis-Related Businesses
Cannabis businesses have similar insurance needs to other businesses; they need product insurance, property insurance, workers’ compensation, and product liability coverage.
Their requirements are not very different from other industries, however, United States federal law and the DEA consider cannabis illegal and harmful, making insurance difficult to obtain for cannabis-related businesses.
2. It Is Difficult To Find Banking Solutions That Cater To Cannabis Dispensaries
Federal law considers all cannabis production, trade, and possession to be illegal, regardless of the fact that many state laws have legalized medical marijuana. Banks and insurance companies hesitate to provide services to businesses declared unlawful by federal law.
The Clarifying Law Around Insurance of Marijuana (CLAIM) is a bill calling for the removal or reduction of the barriers preventing brokers and insurance companies from operating safely and legally with cannabis producers and sellers. When this bill becomes law, it will mark a significant step toward easing the challenges for cannabis businesses.
The Secure and Fair Enforcement Act (SAFE) aims to secure banks and financial institutions that seek to work with cannabis industries. With the passing of this bill, banking and insurance companies can finally conduct business with the cannabis industry. However, this law is not passed yet.
3. Cannabis Businesses Are Difficult To Understand
Federal entities have deep-seated issues with cannabis that have led them to put banking restrictions on the industry. As a result, cannabis businesses often create complicated business infrastructures to maintain the continuity of their operations. They sometimes operate under different names and business entities.
4. Insurance Brokers Have Little To No Knowledge Of the Cannabis Industry
The cannabis industry is different due to its unique nature and risk scenarios. It can be challenging to find brokers and insurance industry experts who have a complete idea of the risks affiliated with the cannabis industry.
The experts must have complete knowledge of the needs and requirements of the marijuana dispensary owners. They need custom insurance policies to secure their business.
5. Cannabis Industry Is Relatively New To The World
The cannabis industry is indeed growing fast; however, it is still a relatively new industry globally. There are few business and financial models to evaluate the risk and actuarial tables. There is a need for more research and risk management analysis for the cannabis industry.
6. Unequal Policies
The policies to which cannabis-related businesses must comply are not equal, meaning they do not provide the same coverage to marijuana dispensaries as other businesses. Some insurance policies don’t align with the needs of cannabis businesses because of the following reasons:
- Standards for lights, security, and ventilation are rigorous for marijuana stores
- Inventory evolution is complex
- The supply of cannabis seeds mostly comes from foreign nations like Mexico
- The cash-only dealing in the marijuana business is challenging to handle. There are no digital records of the transactions
- Marijuana and other cannabis products can be tempered. It can be during cultivation, packaging, wholesale, and distribution
- Theft and security threats are significant issues for marijuana dispensaries. The only cash transaction mode attracts criminals and robbery attempts
7. Security Risk
The cannabis business deals entirely in cash since the banking systems cannot provide their services to cannabis businesses; because of that, cannabis stores are forced to deal with cash only. It has many security issues and theft risks.
Like other retail stores, cannabis dispensaries have the same threats; they are more prone to robbery due to the high-value items present in the store. Cannabis zoning laws also force cannabis dispensaries to locate in less protected areas of the city. Without insurance, these businesses can face significant losses.
MFE Insurance Is The Leading Insurance Provider For Regulated Cannabis Dispensaries
There are not many insurance companies that provide insurance to cannabis dispensaries. MFE insurance specializes in providing excellent insurance policies to state-regulated marijuana dispensaries.
MFE provides myriad types of cannabis insurance to marijuana dispensaries based on unique needs. Contact MFE insurance online today or give us a call at 213-266-7990 for a free quotation for your marijuana dispensary business.