Big multistate operators often get the bend-over-backward treatment from all service providers, but what are insurance brokers looking to get the same treatment for their small-to-midsize client to do?
It turns out, there’s a lot that can be done to procure an SMB cannabis operator better terms and rates.
A group of experts gathered during Insurance Journal’s Insuring Cannabis Summit to talk about adding value to their SMB clients.
The panel was hosted by Norman Ives, executive vice president and cannabis practice leader at Amwins Insurance Brokerage. The panelists were Erich Schutz, vice president, national practice leader for Cannabis at Jencap Specialty Insurance Services, Summer Jenkins, executive director at Cannabis Insurance Wholesalers, and Michael Hennessey, national cannabis practice leader at IMA.
Market Conditions
Schutz talked about market conditions, and how trends could help brokers help their cannabis clientele, including more capacity.
“The increased capacity has grown, fortunately, along with the size of most operators,” Schutz said. “So, you know, going back a couple years ago, there was a lot more self-insuring of different limits or equipment breakdown just because of availability in the marketplace. I think now it’s much easier to get the limits that you need. It’s more a matter of cost and how you structure the actual tower.”
Despite “static” property limits, Jenkins has also been encouraged by some improvements in the market benefitting her clients.”I can say that the rates for cannabis are leveling out,” Jenkins said. “The rates on product, product liability and premises GL have come down.”
Jenkins chalked that up to better-than-expected claims experience for cannabis operators.
“I think the cannabis industry has started to mature. So, the claims have matured,” she said. “I know before we really had no idea how to establish rates. So, we kind of looked at class codes that were similar for businesses that were similar. But what we found is that cannabis is a little bit less hazardous than we originally thought that it would be. The product liability claims definitely have a long-tail. Some of those things are tied to the law, so we’re not really sure how they will mature. But over the past five years, we’ve seen comparatively few product liability claims to other types of losses like theft, and fire, other property related types of losses.”
Best Advice
Ives drove the conversation to solicit advice to brokers specializing in the cannabis space.
“How do you think a broker can add value to the equation overall? To set themselves apart from a generalist?” Ives asked. “How does somebody in the cannabis space add value for their clients and set themselves apart from the competition?”
Hennessey discussed the importance of gaining trust, and amassing a strong knowledge of the industry.
“I think it’s around expertise, both on understanding your client and your market, right?” Hennessey said. “And, and I know that sounds really simple, but what are these companies doing, right? If you don’t know what they’re doing at an intimate level, how can you properly help them get insurance? So, understanding what a business operator does, and then trying to find the right home from an underwriting facility and a carrier that can do that.”
Hennessey hammered home his points about trust and cannabis industry knowledge.
“Do they trust you have their best interest, and have you explained what’s going on?” he added. “I think cannabis is one of the few industries out there – because it does touch retail, agriculture, transportation, real estate, life sciences – it’s such a broad industry, you need to know it.”
Schutz compared the needs a small to mid-size cannabis client to large operators.
“It’s a completely different profile,” Schutz said. “Fortunately, most MSOs are much more savvy buyers and risk averse. So, they are taking most risk transfer mechanisms up, be it product recall, directors & officers, EPLI, cyber, higher limits of liability, higher limits on their auto. The small- medium-sized businesses, they are all cash strapped, but it’s just a very different economic factor based on their funding, based on their position in the marketplace that they really have to look inside and make decisions to self-insure. And it’s very commonplace, whether it’s because it’s something that hasn’t been brought up to them, they don’t see the value in it, or they just can’t afford it.”
Schutz sees that attitude as an opportunity for brokers to tell clients about the coverages that are available, and if a small business doesn’t take up cyber, or EPLl, he said not to hold that against them.
“You offered it. That’s your job,” Schutz said. “You give your explanation of what you think the benefits are, and you let them make a decision. Because at the end of the day, it’s what I call, #cannabis. You assume a price player is a price player and they end up trading on coverage and vice versa. And there’re so many trade-offs in the space that I always think it’s best for agents and brokers to give good advice, slide options across the table, document the hell outta your file, and have the insured make the best decision for their business based on all your guidance.”
Go Deeper
The full webinar includes in-depth information on cannabis insurance products, market conditions and sales techniques. Access it or get more information on the summit’s website.
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