Introduction
Medical marijuana has now been legalized in 29 states and the District of Columbia.
In addition, eight states and the District of Columbia have legalized recreational marijuana.
The legalization movement sparked the inception of marijuana insurance.
Now, the marijuana insurance industry is growing like weeds.
Marijuana Insurance Growing Like Weeds
One of the first marijuana insurers was San Diego-based company Next Wave Insurance Services, which launched a “seed to sale” insurance program in February 2015.
The company offers policies in all legalized states and the District of Columbia for crops, indoor cultivation, retailers, laboratories
While theft and vandalism make up a significant portion of claims made to Next Wave, electrical fires from 23-watt bulbs overheating in grow-ops, and equipment breakdown generally, also account for the largest share of losses.
However, the largest exposure cannabis companies face, be they growers or shop owners, is having inadequate coverage offered by insurers with marijuana exclusions.
The company also offers a series of training courses designed exclusively for registered agents catering to recreational and medicinal cannabis businesses.
While a memo from Attorney General Jeff Sessions earlier this year caused some companies to abandon the marijuana insurance market, even more companies have committed to stay.
The memo read, “Given the Department’s well-established general principles, previous nationwide guidance specific to marijuana enforcement is unnecessary and is rescinded, effective immediately.”
Essentially, the memo shifted federal policy from the hands-off approach adopted under the prior administration to a more individualized approach, giving the power to U.S. attorneys to decide how to prioritize resources to crack down on possession, distribution
“It is the mission of the Department of Justice to enforce the laws of the United States, and the previous issuance of guidance undermines the rule of law and the ability of our local, state, tribal, and federal law enforcement partners to carry out this mission,” Session said about the memo issued on Jan. 4, 2018.
“Therefore, today’s memo on federal marijuana enforcement simply directs all U.S. Attorneys to use previously established prosecutorial principles that provide them all the necessary tools to disrupt criminal organizations, tackle the growing drug crisis, and thwart violent crime across our country.”
A lack of access to federally regulated banks created major insurance issues for marijuana companies because of the risk involved with storing large quantities of cash and paying premiums through alternative methods.
Other than banking, federal regulations haven’t affected Next Wave’s clients much other than preventing them from shipping across state lines, Ward said.
Additionally, similar to the alcohol industry, marijuana has certain risks. According to a recent report by the Governors Highway Safety Association (GHSA), almost 6,000 pedestrians were killed in motor vehicle crashes in the U.S. in 2017.
This leads researchers to believe that a recent trend may present a correlation with rising pedestrian fatalities: the legalization of recreational marijuana in several states.
The report states that while there is no definitive link, marijuana, especially paired with smartphone use, can impair navigation behind the wheel and on foot.
The seven states and D.C. that legalized recreational marijuana use between 2012 and 2016 experienced a collective 16.4% increase in pedestrian fatalities for the first half of 2017, while all other states only saw a combined 5.8% decrease.
The National Safety Council said it is discouraged by the second consecutive year of record-high numbers of pedestrian deaths.
The negative association of marijuana with highway safety may cause other states (and insurance companies) to reconsider their stance on marijuana.
Conclusion
While it is too soon to draw a definitive conclusion on what stance they will take on the issue, there are certainly many advantages and disadvantages to consider.
