Understanding Issues Around Insuring Cannabis-Related Businesses

Dan Wentz:   0:01
Welcome to another edition of the place in your first podcast. My name is Dan Wentz, and we're featuring news and insights from CRC groups, Vast knowledge base of 600 plus producers, right in excess of $8 billion in premium annually. And we're giving you insider access to what's happening with our company and the current trends in the types of insurance we place on this edition of the podcast. The legal uncertainty of cannabis has kind of taken a back seat now that we have strict rules and regulations by state. So underwriters and big carriers can take a look at those strict guidelines and see that it is a heavily regulated industry and convincing them that it's a good risk. This is the placing new first podcast. The commercial cannabis industry is booming to discuss this new and very interesting insurance sector. I've got Jason Howard on the phone with me. He is a senior vice president, our San Francisco office, Jason, First of all, thanks for joining us. And second of all, can you kind of give us a little bit of insight as to what you do in the cannabis sector and you know what you focus on

Jason Howard:   1:07
shirt and thanks for the introduction. And I've been writing cannabis insurance for the last four years in California. Um, and we've seen it go from originally being driven by the marijuana side of it. And now we see CBD taking ah, the lion share of premium and risk opportunity. So, um, not only is it continue to be dynamic in the marijuana side of it, but the CBD is very robust and a new, exciting new growth sector.

Dan Wentz:   1:42
So So CBD really is different from traditional cannabis. And for those of us who are not in an area that it's legal and not being discussed actively in the local news on a daily basis, how would you draw the differences between traditional cannabis CBD and what the differences are when it comes to insurance?

Jason Howard:   2:00
The plant itself is the cannabis planet has two bright as you have the hemp side and you have the marijuana type on the hand plant. The CBD is THC is 0.3 percent of that plant, which allows it to be grown legally and under the Farm Act, which is a federal act that we can grow hemp in every state legally. And so because of that, we're seeing a huge amount of hemp being planted and harvested and supplies of CBD are coming in now manufacturers the suppliers on the other side, you have the marijuana plant, and that is rich in T. C, and that is the marijuana side of it. That is the traditional notion of your dispensary. And you know what was always illegal and now is illegal and legal in 10 states. That's the marijuana side of it. So if you think about it, anything hemp related is legal. And still, we have the marijuana side that is illegal or schedule one drug heavily regulated. We've got 10 states now words legal, and then we've got a bunch of other states words medicinally legal. So that's the main difference when you talk about CBD. Most people are talking about CBD grown or processed from hemp, and the main factor there is 0.3%.

Dan Wentz:   3:20
So with this very interesting sector, is it insurable and how our insurers approaching it right now? In your opinion,

Jason Howard:   3:28
yeah, it's insurable, and we have access to a lot of markets right now that will offer even combo combination policies weaken. Find G l With product liability with excess limits, we can place property and cargo in a marine. There are many more markets now available. So, yeah, the insure ability of the product both on the CBD in and on the THC side continues to grow. Markets continue to come in and make the market more competitive.

Dan Wentz:   4:02
If you think about the history of legalization of marijuana, cannabis in general, you know it's been evolving markets. And what are the limits for that sector right now as far as?

Jason Howard:   4:13
Well, if you want to go back Historically, Lloyd was the first in and also the first out on this and I think they were worried, You know, federally about the legality of it. But as soon as they vacated, there were markets that came in and filled that gap, and they just continue to be more and more. The legal uncertainty of the insure ability of cannabis has really kind of taken a back seat now that we have strict rules and regulations by state that our laws that have been written and copied from state to state or improved bond from state to state, so underwriters and big carriers come to take a look at those strict guidelines and see that it is a heavily regulated industry and its convincing them that it's a good risk.

Dan Wentz:   4:59
And what do you think are some of the key issues when it comes to the sector?

Jason Howard:   5:03
Uh, information? Uh, that is always very, very, very helpful to underwriters. So, um, the most ah perfect example of that would be the large multi-page application that's required to get clearance and get in underwriters. Attention markets require. I think the minimum amount of pages of information is five, but as much as 15 to 20. And so it's a burden to get all that information together and and and provide accurate at on it so that done, drivers can really roll up their sleeves and see what you've got on. And I believe that one of the problems is one of the hurdles to overcome. For the growers on DA distributors on CBD insured in the sector is that they aren't used to filling out insurance applications and understanding the importance of the information they're providing. And so we see a lot of questions left flank a lot of pages left blank and um that just stalls the underwriting process. And it takes a broker who knows how to write the business to get past that and coax the information out of the insured and get to the finish line. And I really see that is the biggest hurdle. It's just the information gathering process is difficult and can take quite a long time for the insured To understand how important it is, good data results in better quote, better terms and conditions for underwriters that confidence that the operation is a top-notch operation.

Dan Wentz:   6:46
I would imagine this is a sector they didn't like to share information. Initially, they don't like the headlines they like t stay out of it. So getting that data and pulling it out of them is probably a job best left to someone who knows what's going on. Like like you and our teams here at C. R. C. They're used to talking with agents about this and coaxing this information out. Yeah, I

Jason Howard:   7:08
agree, and and and it's also, you know, still new um enough to where that information may not exist. And so when you, you know, see a blank app, is it because the information doesn't exist, and we need to create it or, you know, is the or is it just the fact that the process, you know, isn't thinking in that they need to provide the information. So you really do have to dive into it at the right questions, um, and understand the experience of the operation, Aware of that and then, you know, provide that information to the underwriter in a convincing fashion. Uh, the key is being able to convince underwriters that what you have is an insurable operation,

Dan Wentz:   7:49
I guess. Ah, maybe this question answers itself, obviously, because you deal with a lot of cannabis business, but our cannabis business owners actually buying insurance right now. And how do they view insurance? Do they view it? It is necessary.

Jason Howard:   8:02
Yeah, I believe that in the beginning, the insurance budget wasn't accurately estimated, and the numbers that were coming in for the insured were way more than what they thought they should be. Um, And so now that we've seen several years of underwriting and premiums, I think a good broker can let the insured No, it had a time. What kind of premium? They should budget for their lines. of coverage. And by doing that, these operators can accept the cost of insurance more willingly and buy it now, as opposed to a couple of years ago where it was, it was more of, ah, learning curve, a little bit of a shock after what

Jason Howard:   8:48
the

Jason Howard:   8:49
premium was for these lines of coverage. So, yeah, I think more and more operations are buying insurance, and I think more people involved in the industry itself are requiring that their trade partners have insurance to. And so it, ah, peer pressure situation as well. If I'm buying you're CBD oil, I want my CBD oil supplier to have insurance. So in that chain of commerce, we see a long chain of of insurance requirements for before, you know, it was kind of it was more random and who bought insurance and who could afford it.

Dan Wentz:   9:25
And it really is, ah, kind of symptomatic of a maturing industry, something that started brand new. And now everybody is starting to understand what's acceptable in what the kind of norms are for insurance. As far as that goes, what types of insurance should they be looking at

Jason Howard:   9:40
most common? Uh, the general liability and that will cover your third party liability for your operations on your premises on CBD. Then there is product liability that'll cover the third party liability for your sales. And I see those two lines of coverage on the casualties side as the most popular lines of coverage purchase on the property side. Obviously, the building I'm and the stock are the most covered part of that operation. So those two are what I see most. And then excess limits. The operation grows. They start to buy access limits on the casualties. Five. Just recently, we have a new entry into the marketplace for auto. And so everyone's aware autos the hard mean market every day, and auto rates are up. So it used to be almost impossible to get auto insurance for the industry. And now there is. Carriers will provide that. So we're excited to see that grow.

Dan Wentz:   10:44
Okay, so what advice do you have for agents who are trying to get ready for this? And what should they know is they prepare to do it

Jason Howard:   10:50
well, an application that we discussed earlier that, um, is it's kind of a hefty task requires that the agent read the question be familiar with the questions and why they're asking them and pull that information out of their insured. And I've done, um, and I'm sure a lot of RC RC brokers have telephone conferences, meetings with brokers going over the APS and trying to explain to them why these questions are important and how they're going to help the underwriters crafting insurance appropriately and priced appropriately for their insured. So my advice would get on the application, review it. Be familiar with the questions before you start talking to the insurance. And if there's anything that isn't understood and you don't see why they would ask the question with the intent is calling Searcy broker. Ask him. You know what the reason is for that information, and we can help you through that in cooperating in getting that up together. That is the best way to proceed in this industry. Now is have you know, bulletproof and app, as you can start with and you'll get the best attention from the marketplace

Dan Wentz:   12:00
you mentioned, you know, conference call, maybe explaining some of the questions on the apse. How else do you view CRC Group brokers is being beneficial to agents who are trying to write this business right now.

Jason Howard:   12:10
Well, we know the market place, so we know the underwriters and we know their appetite for risk. And when we receive a commission in and we review what the answers are on the application and discussing with the broker the operation, we can, um, get the submission to the best available market and cut out a lot of time spent two minutes to 10 or 15 different markets and trying to get everyone interested in it. I think he is with the experience. Brokers we have can add a lot of value to the time element, their expertise in the marketing situation. The expertise in speaking with the underwriters can cut down the time it takes to review risk into offer terms and the time element of getting insurance quotes for your insured. It seems to be a very, very critical factor and working with a new insured or new operation, um, in this industry. So when you look Thio, CRC and our brokers, you can trust that we're using our experience to help you get the process accomplished, that quick responsible for your shirt and I think in addition to terms and conditions that come just the ability to move through the marketplace and provide the product that you can present. Your insured is where Pierce is really adding value here.

Dan Wentz:   13:38
Great. Okay, well, thank you very much. Jason. I appreciate your time today, and if people want to get a hold of you, they can reach out to you. Well, they can actually pop open the Web browser checkout CRC group dot com and do a search for Jason Howard in San Francisco. And if you're looking for a CRC broker closer to you, you can find them there. You can search all our brokers, search all our people and get someone who's gonna be able to assist you and help you make. The process is easy as possible when you're dealing with your cannabis risk. Thanks, Jason. We appreciate your time.

Jason Howard:   14:05
That's right then. And also Lincoln, um, the social source that I pay attention to and provide a lot of information on cannabis insurance where we hear, see regularly post updates and information that related cannabis. Other sectors of the insurance industry, so linked in as a communication tool, seems to be helpful. Ways to keep abreast of what's going on in the industry.

Dan Wentz:   14:28
Absolutely connect with us on LinkedIn. We'd love it. Thanks, Jason. Placing you first podcast. For more information on today's topic, visit CRC group dot com, where you can tap into our industry-leading library of articles spanning all of the types of business we write. Also, don't forget to connect with us on LinkedIn. We would love to start a conversation with you there to a company search for CRC insurance and make sure you click that blue follow button. Thanks for being a part of this edition of the CRC group. Placing your first podcast will talk to you next time.