Insurance helps keep your business secure and protected. This is what you need to bounce back in case of any eventuality. As a result, you cannot overestimate the importance of insurance. This is even more so in the case of cannabis based businesses.
While there are many insurance brokers looking to cater to the cannabis industry, the truth is every company has unique needs. So, they need an insurance provider that can match all their requirements.
Adequate knowledge and expertise in the industry is a must-have first. Your intended insurance company must demonstrate considerable –if not thorough- knowledge and familiarity with the market. This way, they’ll be able to come up with truly practical, yet worthwhile insurance offerings for clients in the industry.
And T.J. Frost agrees with this. Frost is the cannabis segment leader for HUB International in the US. The company specializes in providing business and personal insurance to North America based companies and individuals.
According to Frost, you should ask some important questions before hiring any insurance broker for your cannabis business. Some of these questions include:
Do they Have Other Cannabis Clients?
This is very important. You want an insurance company that already has some cannabis companies on its rolodex. Their familiarity with these companies shows that they’ll have an idea of your needs.
This is important because running a cannabis business is fraught with its own risks. Having to worry about your insurance provider coming through for you when you need them is the last thing you should do. If anything, your insurance broker should be the one doing the worrying.
You’ll be paying them premiums for your peace of mind. The least you can do is make sure they’ve got the requisite experience.
According to Frost, many insurance policies have hemp and cannabis exclusions.
“We know, as specialists in the cannabis industry, which policies will cover cannabis and hemp operations and which will not, ”…“Your insurance broker needs to have relationships with the insurance carriers who are willing to tailor coverage for your industry.”
This is why he recommends that hemp firms partner with insurance firms that have proven experience, built practices and have knowledge of the cannabis sector.
To make sure that the insurance company has the requisite experience and expertise, ask them about the industry. More importantly, ask them to tell you how they specifically helped another hemp client in the past.
What Other Services and Expertise Does the Broker Offer in Addition to Insurance?
Frost is of the opinion that insurance brokers should offer their new or intended cannabis client additional services and connections. For instance, the broker should have a list of reputable consultants who are familiar with the industry.
These entities can help come up with employee benefits and assess the risk profile of their operations. This way, they can help develop a holistic solution to benefits management, and risk in the company.
According to Frost,
“At HUB, when we go into a prospect meeting, it’s not just the insurance that we’re talking about,”…. “We’re also talking about if it’s OSHA compliant, how their risk mitigation is going, how their claims process has been handled in the past. Do they have safety experts? Do they have proper training? Do they have employee benefits? You want to talk to a firm that can provide you a holistic approach to risk management.”
He goes on to suggest that the broker should have the required industry knowledge and experience, enough to be able to give insights that go beyond just insurance.
“Say, if it’s security and camera measures, if it’s compliance with OSHA or how to put HVAC units in these [facilities] to get the best circulation—we’ve seen hundreds of facilities. Brokers that aren’t industry experts, they don’t have the ability to advise you on these issues.” He says.
Do they Offer Risk Management Options and Solutions?
You should ask your intended insurance broker if they have or are in contact with safety experts, risk management consultants and so on. These specialists can advise your firm on everything from fleet operations to safety protocols and cybersecurity.
If they do, that’ll be great, as it makes it easy for you to access all these services through one point –the broker. Also, it eliminates the need to deal with multiple service providers.
Which Insurance Companies can you Reach for us?
With the industry’s growth, we’re seeing more insurance carriers underwrite insurance policies for cannabis companies. But, they aren’t as ubiquitous as say, life insurance or property insurance providers.
Your broker should be able to bring quite a few of these providers, and recommend those they think will be the best fit for your organization.
Your broker should be someone who has considerable experience and great relationship with the companies they recommend. This way, you know you’re getting only the best possible recommendations.
Can your Insurance Broker Give you Advice on Your Potential Risks?
Of course, yes. Most insurance brokers are trained to spot these things and inform you of them. Even better, you won’t have to pay extra for this advice.
This is important in ensuring that the cannabis company gets the best possible deals when leasing or owning properties. This way, filing claims when necessary wouldn’t entail so many bottlenecks.
According to Frost,
“A lot of these policies for building owners have exclusions for contraband or non-federally legal items. And so, if they have a property policy and they’re leasing to a cannabis tenant, obviously that’s not federally legal, and then they don’t have any property coverage,”.
Does the broker’s Staff have Experience with Cannabis Companies’ Claims?
This question is important because you want to be sure that you won’t have to jump through any hoops when your time comes.
You want a broker whose team knows how to file all necessary claims, and advocate for the best possible payouts for you. And the best way to do that would be through cognate experience.
Do you have Other Intended Services?
While this may not be necessary, have it in mind that the industry is a rapidly growing one. This means you want to be sure that your broker is both agile and adaptable to newly emerging market trends and practices.
This is even more so in the face of growing trans-border activities like US cannabis firms getting listed on the Canadian Stock Exchange (CSE).
According to Frost,
“For HUB International, we participate in actively insuring the industry in the U.S. and in Canada, so we’re able to help those cross-border transactions,” he says. “A lot of dedicated cannabis brokers that are smaller, they don’t have the ability to take you cross-border.”
He goes on to use the directors and officer (D&O) insurance as a case study.
“There will be private placement [in the U.S.], but then when you go to Canada, you have to do a Canadian placement for D&O,”….“If you’re not a Canadian broker or have a relationship there, it’s going to be very difficult to do.”