The cannabis industry continues to infiltrate the consumer market in sophisticated, new ways. The latest trend: cannabis-infused beverages. These drinks appeal to a wider audience. From wellness enthusiasts to casual consumers trying to replace their happy-hour cocktail.

While these beverages are booming, hemp-derived THC products are largely unregulated and create new obstacles for independent insurance agents trying to offer comprehensive insurance solutions to these businesses.

Cannabis beverages come in various forms—seltzers, teas, lemonades, ciders and soft drinks—and are infused with either THC, CBD or both. While the traditional association with cannabis may evoke images of smoking or edibles, beverages offer a more approachable entry point, especially for those who may not feel comfortable visiting a dispensary.

Many new consumers are opting for beverages as their first foray into cannabis because the experience feels similar to enjoying a craft beer or a glass of wine.

There are two main types of cannabis beverages:

• Hemp-derived THC beverages. These are made from hemp plants containing less than 0.3% Delta-9 THC, making them federally legal under the 2018 Farm Bill. They are intoxicating but can be sold outside of the regulated marijuana market. 
• Traditional marijuana THC beverages. These beverages are derived from marijuana plants, have higher levels of THC and are subject to strict state regulations. They're sold exclusively through licensed dispensaries and undergo rigorous testing for quality and safety.
  

While both types of beverages provide a similar psychoactive effect, hemp-derived THC products have gained popularity since they're more accessible. Consumers can buy them in places as common as boutique grocery stores or even bars, making them a more approachable entry point into cannabis consumption.

Safety and Regulatory Concerns Over Hemp-Derived THC Drinks 

While the popularity of hemp-derived THC beverages is soaring, the market is largely unregulated. The 2018 Farm Bill legalized hemp-derived THC as long as the THC concentration remains under 0.3%. Unlike traditional marijuana beverages, which are tightly regulated, hemp-derived THC products are not held to the same safety and quality standards. The lack of federal oversight spells trouble. 

This regulatory gap not only means products might be mislabeled or contaminated but also creates confusion for consumers who may not fully understand the differences between hemp-derived and marijuana-derived THC products. Consumers could inadvertently ingest more THC than they intended, leading to adverse reactions.

Worse still, the production of Delta-8 THC—a less regulated cannabinoid often found in hemp products —can involve dangerous chemicals and solvents. Unlike Delta-9 THC, Delta-8 THC has not been extensively studied. Its long-term effects are unknown, which creates even more uncertainty in this unregulated market.

How Agents Can Help Clients Navigate Insurance Complexities 

Given the regulatory gaps and safety concerns surrounding hemp-derived THC beverages, manufacturers, distributors and retailers need to protect themselves with the right insurance coverage.

Insurance agents play a very important role in guiding their clients through the complexities of insuring these high-risk products.

Here are three areas in where agents can provide cannabis businesses with guidance:  

1) Product liability coverage. One of the biggest risks for businesses involved in the production or sale of cannabis beverages is product liability. The manufacturer or retailer could be in legal hot water if a consumer becomes ill or reacts adversely due to mislabeled or contaminated products.

Make sure the product liability coverage is written with an insurance carrier that fully understands the products being manufactured, distributed and sold. Additionally, review policy forms carefully—and if there's a THC exclusion, ensure it includes a carve-back for products that comply with the 2018 Farm Bill, meaning THC concentrations are at or below 0.3%.

Agents are encouraged to work closely with clients to evaluate policy exclusions and ensure that coverage extends to potential liability from hemp-derived products, which may not be explicitly addressed in all insurance policies.

2) Product recall coverage. In a market as new and unregulated as cannabis beverages, product recalls are a real risk. Contaminated products, especially those made with Delta-8 THC, could lead to costly recalls, damaging a company's reputation and bottom line. Every business in this space needs to have a product recall policy.

By ensuring that cannabis operations have adequate recall coverage, agents can help them protect against the financial fallout of a large-scale recall and ensure they can swiftly respond to any safety concerns.

3) State regulations. While the 2018 Farm Bill legalized hemp products at the federal level, states have varying laws regarding their sale, distribution and labeling. Some states treat hemp-derived THC products the same as marijuana products, while others allow them to be sold in convenience stores and gas stations.

Each state has varying regulations for intoxicating hemp products, so businesses need to stay updated on local laws to avoid potential legal issues. Work with clients to help them understand the specific regulatory landscape in each state where they operate so they can steer clear of fines, product seizures or even criminal charges.

Lee Woodruff is vice president of cannabis practice at Jencap.