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The countdown is on.
Not just for the Oscars, the beginning of spring, or the end of tax season, but for the legalization of recreational-use marijuana, which officially kicks off in Canada this July.
In the freshly released 2018 federal budget, the government has dedicated $82 million between 2017 and 2023 to the introduction of a cannabis taxation regime, while Health Canada is getting $83 million from this year until 2023 to educate Canadians about cannabis.
The insurance industry is preparing, too, as brokers work with legally operating licensed producers to find products that meet their needs. Lars Rittmann, a commercial insurance specialist at Erb and Erb Insurance Brokers, gave Insurance Business Canada his perspective on how he’s working with clients to mitigate risks and what he predicts the cannabis insurance space will look like after legalization.
According to the broker, what’s made the marijuana sector a unique one to insure are the attitudes towards the leafy plant.
“As a commercial broker, I treat it like I would any other business, so what are the exposures, do you have computers, do you have a cyber liability, is there a board, do you need D&O?” said Rittmann. “But there’s a stigma that goes along with it – that the only people who use marijuana are stoners.”
Though social perceptions about marijuana still persist, the stigma is slowly being eradicated by the type of people working in cannabis-related sectors – pharmacists, lawyers, accountants, and of course, insurers.
Clients that Rittmann works with include producers and growers. The main concern he hears revolves around the novelty of the cannabis industry.
“A contractor understands the contracting business – he doesn’t know insurance,” he said. “Same thing with the marijuana industry, so the licensed producer, the ACMPR producers, they need to understand what it is they can get coverage for, what they should have, and what’s not available.”
For dispensaries, product liability insurance isn’t available, and it’s unnecessary for ACMPR growers because they don’t sell to the populace at large, explained Rittmann. Meanwhile, the licensed producer can get this coverage, but they have to track their product and ensure they have an effective barcoding system in place.
And if a commercial cannabis client sells online, they need cyber liability coverage, especially since they’ll be storing sensitive data, like credit card numbers or health card information.
As for what will happen post-legalization, Rittmann looks to other insurance spaces that can give brokers a hint of what to expect.
“Once actuarial history becomes more available and the companies can see what the claims are and what the losses are, and they can get a good handle on it, we’ll find that more and more companies will be providing product to the market,” said the broker. “It’s very much like cyber liability was 10 or 15 years ago. There were very few companies offering coverage. Or even for drones, five years ago, there were only a couple of companies providing UAV insurance.”
His advice to other brokers as July approaches is to take the time to understand the policies that already exist and how they will, or won’t, respond.
“Talk to the underwriters,” said Rittmann, because they have a wealth of information. That’s what he did.
“I just contacted underwriters and then had a discussion with them – here’s what I’m looking to do, what can you provide for me? And then just conveyed that same information to the client, and made it very clear that certain coverages aren’t available.”
