As of this writing, cannabis is legal for both medical and recreational use in 11 states, and legal for medical use only in 22. In the short time it’s been legal, cannabis is already a booming business, projected to generate over $22 billion in revenue by 2022.
But there are significant challenges when it comes to insuring cannabis businesses. The patchwork legal landscape is one such challenge; despite its legality in 33 states, cannabis is still listed as a Schedule 1 controlled substance at the federal level.
In addition, the fact that cannabis is such a new industry means that there is often not enough historical data for underwriters to accurately predict and price potential risks.
However, according to a recent article, huge growth is expected in the cannabis insurance sector in 2020.
The article interviewed four insurance professionals with deep expertise in the cannabis market. They cite several reasons cannabis insurance opportunities will grow in the coming year, including:
The experts predicted that, despite major challenges, more states will legalize cannabis. As more states expand legality, more insurance companies will get into the market.
The increased business will drive opportunity and demand for cannabis insurers—and quality of cannabis insurance products will improve due to enhanced competition.
Experts predicted that, when The US Department of Agriculture finalizes its rules governing testing and transportation of “industrial hemp” in 2020, the market for insurance will stabilize somewhat.
CBD is another area where the rules are ill-defined, contradictory, and leave manufacturers and sellers open to penalties under federal law even when these products are allowed at the state level. Experts predicted that the FDA will introduce better-defined regulations for CBD in 2020 that will make these products less risky to insure.
A More Stable Market
With more insurance options available, experts predict cannabis businesses will be more empowered to negotiate the terms of their coverage—and expect better coverage, not just affordable coverage, to protect their operations.
Not all the predictions focused on growth in the cannabis industry. Experts also pointed out conditions that could limit growth, such as continued political turmoil at the federal level, strict regulations that may come along with increased legalization, and continued lack of access to financial and banking services.
But hopefully, the general trends of increased legalization and a better-defined regulatory landscape will provide a boost to both cannabis businesses and insurers in 2020.