It’s time for insurance agents and brokers to look at the potential in providing insurance for the Cannabis and Hemp industries. Typically, the law lags behind what’s happening in the open market. But with cannabis, the specter of marijuana and onerous federal laws has pushed many sectors away from this lucrative market segment. However, with the passage of the 2018 Farm Bill and the optimism surrounding the proposed 2019 SAFE Banking Act, it’s time to reconsider.
The changing regulatory landscape and the predicted growth of these emerging markets makes Cannabis and Hemp businesses an attractive new consumer base for the insurance industry. These companies will be needed all manner of coverage – from employee benefits to crop insurance. Will you be ready to meet the demand?
Cannabis, Hemp & Marijuana Supply and Demand
Acceptance of the usefulness of marijuana, hemp, and cannabidiol (CBD) is spreading around the globe. In the U.S., more states are legalizing marijuana use. And federal laws are addressing some thorny issues regarding these crops and goods. Legislative changes are impacting the growth of these industries to meet consumer demand.
In 2016, the growth of legal cannabis experienced rapid acceleration, enjoying a 34% bump in consumer spending over 2015. Colorado and Washington were the biggest drivers of this increase to $6.7 billion in legal cannabis product purchases. But as more states approved some form of legal marijuana, growth really took off. By 2018, the U.S. cannabis market had topped $10.4 billion in sales. And as of January 2019, Washington D.C. and 33 states have legalized marijuana for medicinal use. Ten states and D.C. also allow adult recreational use. With these numbers, analysists are predicting a nearly 28% compound annual growth rate (CAGR) in marijuana sales by 2021.
Hemp and CBD
Growth of the marijuana market globally and in the U.S. is only part of the cannabis explosion. Demand for hemp and hemp-based CBD goods is expected to surge as well. CBD-infused products have been growing in popularity with a more than 140% annual growth rate in 2018.
With the removal of some federal obstacles through passage of the Farm Bill last year, hemp and CBD production can now work to meet demand. Businesses are able to seek licenses to legally grow hemp and extract CBD from their crops. Companies will be producing hemp products and CBD-infused items to market and distribute.
A newly released report from New Frontier Data revealed that global hemp sales hit $3.7 billion last year. The data analytic firm projects an increase to $5.7 billion in hemp sales around the world in only two years. And the U.S. is now making impressive strides in hemp production. In 2017, hemp sales broke records in the U.S., reaching $820 million – but didn’t even make the list of top global producers. Jump forward less than two years, and the U.S. has climbed to the number 3 position in worldwide hemp cultivation – behind Canada in second place and China in first place. Now that federal law has cleared a path for expansion, the sky’s the limit.
The Ground Floor Spells Opportunity for Insurance Providers
Again, legislative changes equal opportunity. New laws are giving cannabis businesses legitimacy. This entices big corporations that kept weed and hemp at arms-length in the past. More companies and individuals are looking to invest in this industry. Big business is eager to jump in and cash in, and farmers are eyeing hemp crops with increasing favorability. These hemp farmers will be looking for crop-hail coverage and multiple peril crop insurance (MPCI). The federal backing of MPCI makes this insurance a good bet.
Clearly, the marijuana and hemp sectors are popular and they’re growing. And like other businesses, they need insurance services. Yet they remain underserved by the insurance industries. Estimates place the number of carriers who serve these industries at about 25 to 30 – mostly non-admitted.
Market Segments and Products
As an agent or broker, the potential is huge here. And you have the chance to jump in on the ground floor of the coming cannabis boom. The following market segments will soon be seeking your services to operate safely:
- Landlords leasing to cannabis businesses
- Property owners
- Physicians prescribing cannabis
- Producers of edibles
- CBD extraction labs
- Lab researchers
- Testing facilities
- Transportation companies
These companies and entrepreneurs will need a wide range of insurance products, to include the following:
- Commercial general liability
- Property liability
- Real Property coverage
- Product liability
- Equipment coverage
- Crop insurance
- Stock coverage
- Workers’ compensation
- Employee benefits
You have the option of focusing on some or all the coverage options that will be required.
You’ll need to take the time and effort to learn about these industries and their unique insurance needs. Educate yourself on the risks – both existing and potential factors. Develop an understanding of how these companies operate and the support they need in the insurance sphere. The smart move is to partner with producers and professionals who have a background working in these industries. But you can then position yourself as an authority, attracting new business in a rapidly expanding area. The possible economical rewards are vast.