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Brand new risks always come with opportunities for insurance brokers. With that in mind, Canadian brokers should be jumping for joy at the potential for new business once recreational-use cannabis is legalized on October 17.
But the new always comes with the unknown. What claims lie around the corner? What policy limits will be adequate? Is this carrier offering me the best policy? Of course, there will be cases of learning on the go after the official legalization date, but brokers can get a head start with their market research.
“The key for brokers is to make sure they’re well educated about the product and the market. They need to understand cannabis from where it starts with the seed, through the growing process and through distribution. They need to study how the different processes and facilities work, and what risks they entail,” said David Kerr, client executive at Canadian insurance brokerage and strategic consultancy, Jones Brown, and speaker at the upcoming Cannabis Cover Masterclass Toronto 2018.
“The more you educate yourself about cannabis, the more you’re going to be able to assist your clients in understanding their business interests and provide them with the best tools to cover their risk management needs. Understanding the coverages and the different policy nuances is also important for brokers. Some policies include significant exclusions that would result in a claim being denied, which is the last thing a broker wants for their client.”
Educating yourself about the risk intricacies of Canada’s burgeoning cannabis industry is easier said than done. There’s very little historic data and few comparable markets for insurers and brokers to study and learn from. Some have suggested alcohol or tobacco as markets that might have similarities, but Kerr disagrees, arguing the side effects of cannabis usage are “much more limited” than alcohol or tobacco usage.
As cannabis consumption increases after legalization and brokers see their cannabis client-base pick up, their main challenge is to ensure limit adequacy, according to Kerr. Clients need high enough limits reflective of their revenue and their exposure, he explained, but they also need options from a competitive marketplace so that they’re not being taken advantage of.
“Jones Brown has been offering cannabis cover solutions for about five years, and I would say the industry as a whole is definitely a lot more responsive now than it was when we got into the market,” Kerr told Insurance Business. “That being said, insurers are still playing catch-up with the ever-evolving cannabis industry. There’s still a demand for insurers in Canada to take a leap of faith and enter the industry.
“A lot of the capacity we’re seeing right now comes from UK [Lloyd’s of London] or European-backed insurers. I think there’s a huge opportunity for Canadian insurers and brokers to enter the space because they’re going to be dealing with Canadian-only businesses and there could be lots of potential partnerships. There’s certainly room for growth.”
Learn more about the key risks and coverage needs in the emerging cannabis industry by attending Insurance Business’s Cannabis Cover Masterclass Toronto 2018. On November 28, leading insurance influencers will discuss key perspectives on regulation, cannabis-specific risk, business growth and how these forces combine to shape the current and future insurance market.
