The cannabis ecosystem encompasses a diverse range of businesses including cultivators, processors, product manufacturers, wholesalers, testing laboratories, and dispensaries, according to the Cannabis Business Executive. As states continue to legalize certain aspects of the industry, newly licensed businesses are delving further into retail sales. For the unique risks and challenges these businesses face, independent agents play a key role in helping owners understand exactly what they need when looking to protect themselves and their businesses.

From insurance coverage for cannabis dispensaries, to butane extraction, delivery and transportation, the wide-spread legalization of cannabis for both medicinal and recreational use has ensured the marketplace is now much broader than it was 10 years ago, when it was almost exclusively a medical marijuana market.

For many of the small business owners who have entered the retail market, ensuring they have the correct type and sufficient levels of insurance coverage may not be top of mind. However, many owners understand that purchasing insurance is a licensing requirement—and this is when independent agents can come into play to offer their expertise and educate clients about the coverage they need.

Explaining the “why" for clients is particularly important. “It's incumbent on insurance professionals to help clients understand how to navigate the insurance world and understand what insurance coverages are available so they, as business owners, can make a conscientious choice of where to participate in the risk for their business," says Norman Ives, cannabis practice leader, Amwins.

Like any industry, “understanding the insured's business and procuring appropriate coverage is key," says Joe Dahlvig, cannabis product expert and senior casualty underwriter, Admiral Insurance Group, a Berkley Company. “An agent needs to be able to point out the differences and understand which coverages are most important to a client."

The good news is that agents involved in providing cannabis coverage are experts in dealing with the intricacies of the market and have relationships with other reputable people in the niche to help provide clients with what is needed for their specific risks.

Because “it's such a highly regulated and small niche, it's important to be prepared to gather the right information and work with an individual who has the expertise—they can easily explain why such items are needed," says Jason Scheurle, national product leader, cannabis, Burns & Wilcox. “It's going to speed up the process and it's going to make everything easier."

Further, in a market where there is still limited carrier participation with policies written primarily on a non-admitted basis, agents who have access to more than one carrier participating in the space can be of great benefit in providing differing coverage options for clients. 

By understanding a client's risks, as well as their budget, agents can present coverages that meet state and local regulations. In a market that is developing, an agent can identify the coverage gaps that clients need to be aware of.

“Be on the lookout for exclusions such as heavy metals, pesticides, mold, fungus, and vapes or batteries," Dahlvig says. 

Also, “the new participants entering the market, and even some of the legacy carriers, are getting far more restrictive on the limits of insurance that they're willing to provide for assault & battery," Ives says. “Particularly for dispensary exposures, because you have so much foot traffic coming in and out and they deal with the general public, these claims can be excluded."

Independent agents with the expertise to operate in this niche market can certainly help small cannabis businesses understand the crucial insurance coverages needed to safeguard their business and to ensure compliance with legal requirements.

Olivia Overman is IA content editor.