Takeaways from Talk About Regulators and Cannabis Insurance
There is a shortage of carriers offering insurance to cannabis companies in many states, forcing those companies to pay more for policies or be underinsured.
Regulators in several states are stepping in and spending time and resources to encourage more insurers to get into cannabis insurance. States like California, Colorado, New Jersey and New York are looking for ways to get insurers to offer products and services to cannabis companies.
In the last Insuring Cannabis podcast, we spoke to an insurance and legal expert and a regulator to find out what regulators are doing to encourage carriers to enter the market.
Here are some takeaways from this conversation. You can listen to the full podcast posted above or visit journalassurance.tv.
The Colorado Division of Insurance is a regulatory body that throws the welcome mat. The division sponsored the Colorado Cannabis Business Insurance Forum, a series of four virtual webinars.
The forum kicked off in April with a presentation from Colorado’s cannabis regulatory agency, the Marijuana Enforcement Division, to discuss the state’s regulatory structure.
They also had presentations offering data from the state’s seed-to-sale tracking system and product panels and insurance forms.
Records of all forum sessions are on the ministry’s website.
“The intention behind the webinars is to bring together the insurance industry and the cannabis companies,” said Brown, Colorado deputy chief insurance commissioner. “Because we understand that there is a need for insurance for cannabis companies, and at this point the insurance industry has been a little reluctant to step in and provide coverage. What we found out is that there is coverage for cannabis in the over and over lines market. But at this point, we’ve only admitted carriers in Colorado that offer coverage for very limited single-line aspects such as workers’ compensation. “
Former California Insurance Commissioner Dave Jones had encouraged greater participation in the cannabis market as early as 2017, going so far as to say that the California Department of Insurance “would accept” just about “all rates filed by insurers offering products to cannabis companies.
Regulators have also been a bit more flexible in approving insurance forms for carriers, according to Phil Skaggs, deputy legal counsel for the American Association of Insurance Services, a national insurance advisory organization.
“It’s kind of an informal incentive that a lot of regulators are applying, they are eager to see a quality program in their market,” Skaggs said. “So during maybe as a pre-filing conference, this point will be expressed that” we will review your forms, we will review your rates, but the degree of scrutiny that we put on this review is not as much as this would be for an established program like owners or other business owners or something like that.
Skaggs has tried to spread the word within the industry about the potential of cannabis, and has spoken to insurance departments in several states about it.
He said regulators are doing more than just educating carriers about the cannabis space.
“Another area is tackling financial barriers,” Skaggs said. “There are financial incentives such as tax exemptions that they offer or lower minimum financial requirements, reduce the amounts that must be paid into state guarantee funds, and so on. There are operational barriers that can be removed by providing flexibility and controls that could apply to distribution channels or content of disclosure notices, availability of payment tools or electronic policies, various mechanisms for reporting or even claims resolution practices and audits.
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