Unique vapes, infused cocktails and even personal hygiene items — the variety of new and emerging cannabis products is a clear sign the industry is maturing and innovating. And more importantly for insurance professionals specializing in the cannabis space, insurance claim histories are becoming clear.
This rapid rate of product evolution is leading to important coverage discussions for insuring cannabis specialists and their clients.
A group of experts recently shared their insights on the ever-changing cannabis insurance market during Insurance Journal’s annual Insuring Cannabis Summit. The panel was moderated by Shauna Blackburn, cannabis team leader for Blitz Insurance.
Panelists talked about trends, coverage challenges and emerging risks in the 40-plus-minute discussion.
“It’s been really exciting,” Stephanie Bozzuto, cofounder of Cannabis Connect Insurance, said of all the evolution in the past four years. “But sometimes, we have to make sure we understand it and we can explain it to underwriting. Just to make sure that it can be included on the policy.”
Trends
Bozzuto is seeing the development of patented herb grinders and vape pens and different ways of cannabis consumption, including inhaling vapor from a cup through a straw.
At Gilbert Insurance Group, ultrasonic nanoemulsification, a process that enables cannabis manufacturers to use less cannabis when extracting, has crossed Danielle Hernandez’s desk.
She views tracking and finding out about new developments as an essential part of her job.
“Kind of what I see myself as is a researcher,” Hernandez shared. “Because there’s new science that’s coming up all the time, and if I don’t understand it, there’s no way I’m going to be able to go (to an underwriter) and say, ‘Hey, here’s what they’re doing. It’s not a big deal. Just write it.'”
She is seeing extraction change as operators move away from traditional extraction and into cold water extraction. They’re trading systems that rely on C02, butane or ethanol — combustible solvents — for systems that rely solely on cold water.
Risks
The experts on the panel discussed opportunities, and also covered the risks that go along with these new developments.
In Brenda Wells-Dietel’s eyes, delta-8 and other novel cannabinoids present the biggest risks to consumers. The insurance and risk management professor at East Carolina University said these products are “virtually unregulated,” a stark difference from the heavily regulated systems and protocols in place in states where cannabis is legal. She also pointed to limonene, a kind of terpene that can yield euphoric effects, as a risk when it is concentrated and added to products.
While speaking to the many unknowns surrounding new cannabis products, Wells-Dietel called out a lack of research on mixing cannabis with products like kava tea, which is known to be dangerous when mixed with alcohol.
“We haven’t studied that,” she said of mixing kava and cannabis, adding that “we don’t know if that’s safe.” Cannabis’ federal schedule 1 drug status “prevents us from doing great research so that we can figure out what’s safe,” Wells-Dietel said.
Coverage Challenges
For some clients with newer products, securing adequate product liability coverage is important, but it can be difficult. According to Bozzuto, policies that cover all the exposures can be “three, four times more in premium than what they anticipated.” This sticker shock can make coverage-focused clients shift their tune and prompt conversations to shift to finding a middle ground with some exposure uncovered.
“It’s very similar to what we saw six years ago with cannabis,” Bozzuto said, “where the pricing was a little bit inflated. Because the product was newer and there wasn’t a lot of analytics and data behind it to know what the future claims may be.”
Shipping products from overseas can also complicate the subrogation process; worldwide product liability just “isn’t there yet for this industry,” Bozzuto said.
Hernandez added that cannabis companies are no different from other manufacturers or operators when it comes to bringing in products from other countries.
Foreign product exclusions could lead to uncovered bodily injuries and property damage. Hernandez also said additives to ingredients and other products exclusions are increasing and stressed that deep examination is key when deducing how a form could impede coverage during a time of loss.
Go Deeper
The full webinar includes risk management tips, client selection advice and educational pointers. Access it or get more information on the summit’s website.
Related: Summit: Cannabis Data A Key to Growing, Retaining Client Base
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