Cannabis Coverage: A Fixture, Not a Fad
Cannabis Coverage: A Fixture, Not a Fad
Phil Skaggs | Assistant Counsel, AAIS Government Affairs, Legal & Compliance
In April 2018, AAIS filed the first Cannabis Businessowners Policy (CannaBOP) in California. Since then, the cannabis industry has exploded – and interest in CannaBOP has spiked. Eleven states and the District of Columbia have fully legalized cannabis to date, with more states looking to legalize recreational and medicinal cannabis usage in 2020. Expanded use in cannabis means more need for insurance solutions, positioning AAIS to lead the way.
Deciphering the Cannabis Market
The term ‘cannabis’ is broad. It covers both medical and recreational marijuana, as well as cannabinoid products. Cannabinoids are one of the classes of chemical compounds found in cannabis. They include, most notably, cannabidiol (CBD), which promotes relaxation and relieves anxiety without psychoactive effect, and tetrahydrocannabinol (THC), the psychoactive component that produces the euphoric high associated with cannabis.
Hemp and the 2018 Farm Bill
A cornerstone of the cannabis industry, and a key focus for AAIS, is hemp. Hemp is categorized under federal law as any cannabis plant that contains a concentration of no more than 0.3% THC by dry weight. Hemp’s fibrous nature and quick growing cycle make it an efficient and effective choice for textiles, paper products, plastics, polymers and more.
In 2018, hemp was effectively legalized and removed from the controlled substance list under a federal farm bill. With that legislation in place, states now have the authority to regulate the production and sale of hemp and hemp products. However, states are prohibited from interfering with the transfer of legal hemp crops and products across state lines for commercial or personal purposes.
Most importantly, the bill opened the door to protections for hemp under the Federal Crop Insurance Act and removes barriers to private insurance and banking services. Producers and businesses that deal in hemp products, including CBD extracts, are now free to pursue this business more aggressively and with less concern that a seismic shift in federal priorities will disrupt the industry.
Since the bill’s passage, analysts are seeing the hemp industry evolve into a legitimate and promising market. Developments are underway in several states, including Alabama, Kentucky, Oklahoma, Tennessee, North Carolina, Virginia, and Pennsylvania. These states, among others, are taking steps to develop new or improved hemp programs, pass legislation, and submit plans for USDA approval.
Looking ahead: Expansion, Enhancements and Endorsements
The unprecedented growth of the cannabis industry creates great opportunity for AAIS Members. As the marijuana and hemp industries continue to expand and mature, more eyes are turning to supporting industries, such as insurance, to reinforce cannabis businesses.
From first- and third-party homeowner’s claims covering equipment, plants, theft and storage, to personal and commercial auto policies protecting product transportation, commercial properties, product liability, cybersecurity and more, the insurance industry will play a critical role in the success of the cannabis industry.
Standardized programming and deliberate policy language are essential. AAIS is working to supply insurers with practical tools and comprehensive coverage options responsive to all levels and categories of cannabis risk. AAIS has set aggressive goals for the coming years, focusing on expanding and enhancing the CannaBOP product, developing exclusion and hemp coverage endorsements, and updating its farm, commercial and homeowners’ program updates to allow for cannabis growth and sales.
The cannabis industry is a fixture, not a fad. It is growing quickly and profitably. With the assistance of AAIS tools and programming, your business can, too.