Why commitment, efficiency are important for budding cannabis sector
Insurance is frequently seen by those in the industry as a black-and-white numbers game — the prevailing sentiment often being, the more people, businesses and industries you can serve, the better.
While I believe diversification has its place in selling some forms of coverage like home and auto, standing out as a commercial insurance broker often requires industry-specific specialization if you really want to distinguish yourself as an expert in the field. This is especially true in the burgeoning cannabis market.
Shortly after cannabis began taking off in 2012 with Washington and Colorado becoming the first states to legalize it for recreational use, Stratton Agency developed our Nine Point Strategies division to specialize in seed-to-sale cannabis-related businesses, meaning that we work with everyone from the cannabis growers down to the dispensaries that sell products directly to the customer.
Insurance needs can vary greatly from business to business. Everyone is required to purchase general liability to cover their property, and if they have employees, they need workers’ comp insurance. Most states require surety bonds, and some require product liability coverage, which can be critical in helping a business defend itself against claims tied to product defects, damages, or related injuries. Associated with product liability coverage is product withdrawal coverage that comes into play when specific products need to be taken off the shelf following a claim. What can be scary is that not much more coverage is required in many states. Of course, additional coverage is often necessary, or even essential.
Generally, owned auto and non-owned auto are atop the list of coverage priorities I recommend for business owners due to the rising liability risks involved with potential accidents, legal fees and verdicts that can put companies out of business. Beyond that, cannabis business owners’ coverage needs run the gamut to include everything from property insurance, crop insurance, cyber liability, and directors and officers insurance to errors and omissions, employment practices liability, builders’ risk, and group health insurance. It all depends on the subsector of the market and the locations in which a business operates.
It is natural for brokers to want to provide comprehensive coverage to every client; however, many cannabis-related business owners take an à la carte approach to selecting their policies. Because cannabis is an emerging industry, there is a disproportionate number of startups and fledgling operators in the market. These business owners initially may not have the budget for every type of insurance they ultimately would like, which is why it is important to build a risk portfolio and discuss a phased strategy for prioritizing coverage based on that company’s unique situation. While most business owners in other sectors will buy almost everything they think they need up front, those in the cannabis space buy what they think they need most first and then determine what they can afford. It might take a year or two for these businesses’ portfolios to come together in terms of maturity and cash flow to afford all the coverage that may be necessary.
It is the duty of every trusted risk advisor to be a thought leader in the industries covered. This is especially true in serving the cannabis market. The shifting legislation and politicization surrounding the industry make it more complex than many individuals realize, and regulations vary from state to state. Many owners are busy trying to run their business, and they depend on their risk advisor for counsel. The cannabis industry is unique and has more exclusions than coverage, and depending on the type of insurance, policyholders might not have the proper coverage or, even worse, not be covered at all.
To be successful in the space and be profitable from a time and risk management perspective, agents must be efficient and be very aware of what the clients’ needs are so time is not wasted trying to figure it out on the fly. Having the right digital tools to streamline processes has become not just a best practice, but a necessity for maximizing efficiency and saving time.
There is a new digital aggregator that I helped develop that has been specifically designed to serve the cannabis sector. It is called ITW or In The Weeds. This product allows for both supplementals and application completion in a digital form, streamlining the process by limiting the need for multiple individual submissions. This will be pivotal in helping insurance agencies and MSOs throughout the entire ecosystem fast-track reporting functionality because it’s going to take the thousands of paper applications and supplementals and digitize everything for easy back and forth. It also allows you to download and upload basic data at the push of a button, keep information accessible in a central dashboard for remote working, and shop the entire marketplace for coverage faster and easier. It is going to be a tool that revolutionizes the space and gives insurance agents time back in their day for what really matters – serving their clients and building their business.
The cannabis industry is expanding daily. It’s one of the largest- and fastest-growing sectors we’ve seen in the last decade, and it’s going to continue to grow for probably the next 10 to 20 years. Presently, there aren’t a lot of brokers serving the space, and there are even fewer that stand out for their expertise. For those insurance brokers willing to spend the time and effort necessary to familiarize themselves with it, opportunities abound.
At the end of the day, brokers need to be able to convey to operators that having the right coverage is just as important as running their day-to-day operations and making a profit. By educating your clients and helping them understand what is needed to protect their livelihood, you can stand out as not just an insurance broker, but as a trusted risk advisor.
