Insuring Risks Associated With the Production and Sale of Marijuana

Insuring Risks Associated With the Production and Sale of Marijuana

Deborah L. Lindberg, Joseph C. Sanders, Deborah L. Seifert
Copyright: © 2021 |Pages: 8
DOI: 10.4018/IJRCM.2021040102
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Abstract

The strong growth potential of the cannabis industry offers insurers significant new business expansion opportunities, but the industry is complex and faces many unique risks. Legalized cannabis businesses need and desire insurance to mitigate these risks. However, the availability of insurance lags behind this need for insurance. Marijuana is still illegal at the federal level, causing many insurers to be hesitate to insure a federally illegal activity. These legal uncertainties will continue until Congress settles the conflict between federal and state laws. Further, there is little data available on the cannabis industry, making it difficult to price insurance products. However, rapid expansion of the cannabis industry has produced multiple unique needs and complex risks that need to be insured. This paper examines many of the risks faced by the cannabis industry, and the issues keeping many insurance carriers from entering this growing market.
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Introduction

Rapid expansion of the cannabis industry has produced multiple unique needs and complex risks that need to be insured. This paper examines many of these risks faced by the cannabis industry, which are keeping many insurance carriers from entering this growing market.

California became the first state to allow the medical use of marijuana when voters passed Proposition 215 in 1996. Exhibit 1 shows that 33 more states, as well as Washington, D.C, have passed similar laws and 11 states and Washington, D.C. have approved adult use cannabis for recreational use, according to the National Conference of State Legislatures (NCSL 2019). Social attitudes towards cannabis consumption have continued to shift. 67% of Americans now say the use of marijuana should be legalized, up from 12% in 1969 (Pew Research Center 2019).

Table 1.
States That Have Legalized Marijuana – As of January 1, 2020
States where medical marijuana is legalizedStates where recreational marijuana is legalized
AlaskaAlaska
ArizonaCalifornia
ArkansasColorado
CaliforniaIllinois
ColoradoMaine
ConnecticutMassachusetts
DelawareMichigan
FloridaNevada
HawaiiOregon
IllinoisVermont
LouisianaWashington
MaineWashington D.C.
Maryland
Massachusetts
Michigan
Minnesota
Missouri
Montana
Nevada
New Hampshire
New Jersey
New Mexico
New York
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
Utah
Vermont
Washington
Washington D.C.
West Virginia

Source: Adapted from the National Organization for the Reform of Marijuana Laws, http:/norml.org.

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