Data and technology are becoming more important to the cannabis market as it matures, and insurance professionals specializing in the segment would benefit from keeping that at top of mind.
A group of experts gathered during Insurance Journal’s Insuring Cannabis Summit to discuss emerging opportunities and notable insurance focus areas. The panel was hosted by Charles Pyfrom, chief marketing officer at CannGen Insurance Services. Panelists shared their perspectives on data implementation and the importance of maintaining close contact with clients throughout policy lifecycles.
Despite disappointing cannabis sales in long-legal states in the West, cannabis data continues to be a mixed-bag, with rapid growth from newer states in the Midwest and the East. Sales figures also point to long-term growth for the industry as a whole.
Legal cannabis industry retail sales will grow to more than $33.5 billion in 2023, a recent Marijuana Business Daily forecast showed.
New and expanding markets are driving rapid growth. And as the industry matures, insuring cannabis experts are leaning on accumulated data to align policies with business projections and loss histories.
“What I am seeing is that there are insureds that are underinsured,” said Curtis Prince, CEO and founder of Flux Insurance Services. “So, there’s still a lot of insurance to be sold.”
Coverage Opportunities
Many cannabis operators are first-time business owners who may not fully understand what comes with being an employer. They also may not understand proven risk management, nor may they understand the exposures that endanger their livelihoods.
In addition to securing required general liability coverage, Prince encouraged retailer brokers to engage in workers’ compensation conversations “right out the gate.” Employees have the potential to be a cannabis business’ largest liability, so making workers’ comp a focus “also helps you get more immersed with the business owner and what the business owner has in terms of pain,” he said.
Jesse Parenti, founder of JP Squared Consulting, believes next biggest area of focus should be automotive coverage, which “is the only thing you have in your portfolio that can create an extinguishing event.”
Telematics can help cannabis operators manage, monitor and see their product-moving fleets, Parenti said.
Prince called telematics “a great HR tool” that allows business owners to be proactive in discipling unsafe drivers. He said it also provides in-depth data regarding claims that is “far more valuable than just traditional loss history because they’re able to ascertain this is exactly what happened with that vehicle during that event.”
He later called telematics “the future of cannabis distribution.”
Because so many cannabis businesses are new, panelists highlighted the value of transparency and carefully explaining how the insurance model works. They stressed the importance of keeping in close contact with policyholders — not popping up only at renewal time.
While sharing coverage information early is crucial, depending on the circumstances, clients in the legal cannabis space may not need every coverage on day No. 1.
“You have the best ability with an emerging market to actually cross-sell right when you bind the coverage,” Prince said, “and then put a service plan in place to be able to engage with them ongoing and help them be proactive.”
Data and Bottom Lines
Data influences carrier risk appetites, hastens underwriting processes and can ultimately lead to correct coverages that align with accurate forecasting. Setting realistic targets is key when securing coverage for potential policyholders. In short, better data leads to better outcomes, the panelists agreed.
“I’m really big on correct forecasting,” Parenti said. “I think the biggest thing is people’s ego, and over-projecting bites them really hard. And they don’t really know the ramifications until they feel that pain.”
Flux’s platform has empowered brokers to better aid clients in forecasting the insurance costs of new ventures and avoid hitting bottom lines, according to Prince.
Telematics, GPS and dash cam recordings saved one of Parenti’s clients from being hit with a $12 million lawsuit that may have ended the business.
“Data and technology is really where this industry is going,” Parenti said. “One of the benefits of cannabis is it embraces technology where most industries don’t. So, we have that in our favor. The challenge is that in the commercial insurance world, it really lags when you have that gap between technology and what’s needed.”
Max Meade, insurance advisor at Brown & Brown Insurance, uses data to enable him to tell clients how they should build insurance costs into P&L predictions.
“So, I can show them, again from an industry average, what’s happening,” Meade said. “The types of claims, the cost — so it’s more of a visualization for them. That gives them a better understanding of, ‘Ok, this insurance responds to this, this does this.'”
Pyfrom added: “The common theme that I hope everyone heard here is data is key.”
Go Deeper
The full webinar includes in-depth information regarding delta-8 and CBD, notable auto insurance exposures and the cultural shifts propelling the legal cannabis industry’s growth. Access it or get more information on the summit’s website.
Related: Summit: Insuring Cannabis Specialists Talk Trends, Risks and Coverage Challenges
Topics Cannabis
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