Inszone Insurance Services, aka, Cover Cannabis, offers peace of mind to compliant businesses.
Operators in a quasi-legal business environment like cannabis need to have their risk-management strategy in check, especially as more states prepare to go legal. In a fast-moving, quickly changing climate, even cannabis business owners with small operations want to make double sure they’re protected and playing by the book.
So, while you may know the ins-and-outs of retail, staffing, supply lines, and other necessities, if you want to know what’s really at stake you should consult with insurance professionals you trust. A good broker will be able to provide a complete picture of the coverage you need to stay in compliance, as well as the best strategy to protect against catastrophes. Whoever said “shit happens” probably was an insurance agent.
Inszone Insurance Services specializes in coverage for cannabis business operators. Chief Operating Officer Chris Walters offers advice.
What does Inszone offer to businesses that a typical insurance agency does not?
Inszone Insurance Services is a full-service agency. We pride ourselves on being experts in the industries we serve. If we can’t do it well, we won’t do it at all, period. Our agency has been alive for more than fifteen years. Our areas of expertise are personal lines (home, auto, umbrella, toys), commercial property (strip malls, apartment complexes), contractors of all kinds, and yes, compliant cannabis businesses. When we commit to service a segment of the insurance market, we go all out. My agents specialize in a specific area, and we keep them focused on their area of expertise.
To earn the trust of clients—which is, in my opinion, the most important element of our job—you have to be an expert in the field. Our agency has been serving cannabis businesses since 2007. I’m proud to say we were the first in the industry. To reach our cannabis business operators (CBOs) more effectively we created Cover Cannabis. With a precise focus in mind, Cover Cannabis is a marketing firm fully dedicated to educating cannabis businesses of all classifications about the coverage available to them.
We receive a lot of referrals from both our customers and professional networks. In addition, we participate in several trade shows each year, as well as more intimate venues such as association meetings, in order to educate CBOs. We’re active in political advocacy and make connections there, as well.
What types of businesses do you work with mostly?
Our primary focus has been on compliant cultivators and dispensaries. Over the past few years, we’ve been providing more and more of our services to compliant manufacturers, delivery services, and processors. There is so much innovation in our industry that the business types or “classifications” are always changing. For instance, we’re now working on providing the right scope of coverage for cannabis smoking lounges and tour services.
What type of services and policies do they usually require?
Policies are available for compliant commercial cannabis operations. We do not insure personal grows or non-compliant businesses. General liability is the most common coverage request. This type of insurance is typically required by a landlord when leasing space.
We’re licensed nationally, and some states have insurance requirements. For instance, Colorado requires a bond and Washington State requires product liability. We help our customers meet those requirements. We also help CBOs protect their investments with a full line of property coverages. Our property policies are designed to insure structures such as buildings and greenhouses, equipment and tools used for grow facilities, finished stock and inventory, cash on hand, and even business income loss after a disaster. For our indoor and greenhouse customers, we also insure their live crop. Our property policies are designed to protect against fire, theft, and vandalism-type losses.
We want our customers to know they can be insured just like any other business. Workers’ compensation is something every business with employees should carry to pay in the event of a work-related injury. Commercial auto coverage is available for company vehicles. We recommend hired and non-owned auto coverage when employees are driving their personal vehicles for business purposes. We even write directors and officers policies. We offer a wide range of solutions.
Is it difficult for cannabis businesses to find insurance brokers or agencies?
I think there is a stigma. Agency owners and insurance company executives may feel working with cannabis businesses will damage their reputation. You won’t see the big insurance companies that advertise on TV writing policies for Cannabis Businesses any time soon. That’s their choice to make. For me, we’re happy to serve a market in need. From my perspective, a Cannabis Operation is a unique business. You want to deal with an agent that knows the ins and outs of the industry. You need an agent who speaks your language.
Most importantly you want to make sure your premiums aren’t going to waste. A policy written incorrectly is a waste of money. There have been several products put on the market that literally provide no coverage, yet some agents will still sell them. There are good agencies out there that know the space and can properly underwrite cannabis businesses.
Are premiums higher for this industry over others?
There is limited competition, and that may have some effect on pricing. However, premiums are not nearly as high as most expect. Keep in mind: Many of our coverages are not required by law. If there isn’t value for the client, they won’t buy a policy. Carriers need to consider the risk and charge an appropriate premium.
Cannabis businesses are forced to operate in cash today. They have a product that is high in value and easily moved on the black market. Indoor grow sites use massive amounts of electricity. Gallons of water are stored inside. Public opinion of cannabis businesses is split. These are just a few factors that might contribute to a claim for fire, theft, or vandalism. Exposure to loss is huge.
Should businesses consider any types of special coverage?
Most of my clients have employees and have yet to purchase workers’ compensation insurance. This one is required by law in most states and often overlooked. It’s a big step for an old-school cannabis farmer to run formal payroll and buy workers’ comp.
Product-liability insurance is the other big one. Without formal standards for product development, testing, packaging, and labeling, CBOs are taking big risks to pave the way. Manufacturers are especially at risk. A marketing defect such as improper labeling or an inadequate safety warning could easily turn into a class action suit with big dollars at stake. CBOs need to have a recall plan in place and be prepared to take decisive action if faced with this type of lawsuit. It’s easy to sue someone, and legal defense doesn’t come cheap. Product liability insurance is going to provide your defense.
Are there ways for dispensary owners to insure against catastrophic or unforeseen events?
Sure. It’s important to note getting busted isn’t something we can insure against. Robbery, fire, and product liability are issues we tackle. When a dispensary owner buys a policy, they will need to go through a standard safety inspection of their facility or farm. We want to make sure the facilities are well maintained. A licensed electrical contractor of our client’s choice will need to complete an inspection and sign off. A product recall plan needs to be in place.
Outside of that, it comes down to the security measures you take. Dispensary owners are required to have surveillance and a buzz-in door, and inventory needs to remain locked and secured in a safe meeting certain specifications.
Training is the most important aspect in preventing and limiting losses. Standard operating procedures need to be in place for everything from handling cash and product to how you should react during an attempted robbery or fire. Business owners need to be certain their staff will respond correctly under pressure.
With recreational marijuana use about to become legal in California, are insurers ready with coverage/policies for new businesses?
The innovation in the industry is amazing. If we can gain a good understanding of the business, it’s likely we can insure it.
What are some things an entrepreneur should consider before starting a cannabis business?
Insurance is typically the last thing considered when preparing to open a shop. It would be wise to move your risk control up near the top of the list. You should certainly be meeting with an attorney, certified public accountant, and insurance agent who know the industry. The legal environment is uncertain, and the risks are real.
What else should we know about insurance?
The right policy and coverage are available to CBOs. Find a good agent and build a trusting relationship with them.
Your agent needs to be aware of all your business operations. Be sure to update them as your business plan changes. For instance, if a cultivator decides to start manufacturing, the policy needs to be endorsed and we need to work on a product-recall plan. Ask a lot of questions and make informed decisions about potential gaps in coverage.
What are some of the unique products available?
The most unique line is certainly our crop coverage. If a cultivator has crop loss due to fire, theft, vandalism, or equipment breakdown they can recover the wholesale value of the product. The crop valuation uses a very simple formula that’s easy for non-insurance people to understand, and the underwriting process is straightforward. Our cultivators frequently are shocked to find out the coverage is more affordable than they thought it would be.