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Policy wording standardization will evolve along with the cannabis industry itself but also allows buyers flexibility in a newborn industry, sources said.
Regulators are also playing a role in the quest for standardized policy language.
“We’ve found the departments of insurance have been incredibly flexible in our conversations and filings,” said Joseph Jonas, product manager, commercial lines for the American Association of Insurance Services.
“There’s very limited participation in the cannabis market on the side of the insurance carriers, so there is a strong desire by the departments of insurance to encourage more market participation. They are subsequently more willing to work with us on policy wordings,” Mr. Jonas said.
The excess and surplus insurers that write much of the cannabis industry coverage “have the ability to manuscript policies,” which ultimately leads to a lack of consistency, Mr. Jonas said. As the market matures, more policy wording standardization will occur, and this will be bolstered by additional admitted market participation.
AAIS has a filed product, Cannabis Businessowners Policy, which has been approved in Colorado and California. It is built on a traditional business owners policy with some 80 endorsements for cannabis-specific exposures and exclusions, similar to those found in a program for nicotine, Mr. Jonas said.
Policy wording flexibility does have some advantages for a nascent and explosively growing industry, said Charles Pyfrom, chief marketing officer of CannGen Insurance Services, one of the insurers currently writing cannabis business.
“I think it’s beneficial for the buying community to have that flexibility, working in an industry like this that’s constantly evolving,” Mr. Pyfrom said. Policy wording agility will also help insurers support the cannabis industry by being able to react quickly as regulators introduce new and updated guidelines.
Mr. Pyfrom said “the number one ask” from cannabis operators is still capacity, as many are not able to secure the limits they desire, especially for total insured values.
From a claims perspective, some standardization of terms would be welcome, said Gerrit Nagarwalla, claims manager at Canopius Group Ltd. in St. Charles, Illinois. “One area where it would be really beneficial, a lot of claims folks would appreciate as the cannabis market matures a little bit more standardization,” of things like definitions, Mr. Nagarwalla said.
Legislation introduced in Congress earlier this month that would allow insurers to cover cannabis businesses in many states without the threat of federal penalties would provide relief for the sector and has a good chance of passing, experts say.