Understanding Your Cannabis Insurance Policy: The Necessity for Crime Insurance

As the medical and recreational cannabis industry continues to grow and thrive, the demand for crime insurance products is also increasing. Cannabis-related businesses are subject to risk at every stage of the supply chain, with a myriad of potential loss exposures ranging from property and equipment damage, to general liability and product liability, to simply being a cash business which can lead to criminal activity and theft – the most common cause of loss in this new and lucrative industry. This new reality was recently punctuated in a 1/20/20 article in the Denver Post titled “Denver dispensary burglaries hit 3 year high as 2019 ended with a rash of armed robberies.” 

However, the reality is that insurers have been hesitant about entering the cannabis market due to lack of banking reform, the fact that cannabis remains illegal at the federal level, and the unknown risks surrounding this new and emerging market – with little historical information on past claims from losses. Big insurance companies have been reluctant to jump in, but the reality is that cannabis companies need crime insurance solutions now that can help protect all lines of business operations. Potential risks exist throughout the vertical cannabis supply chain – from cultivators, to processors and extractors, to product manufacturers, testing laboratories, dispensaries, landlords, buildings under construction, and ancillary businesses. Any cannabis company that touches marijuana is subject to risk and loss, especially crime and theft.

According to Insurance Business Magazine, “Approximately 90% of insurance claims in the US cannabis industry so far have involved an element of theft.” (Dec, 2019). The use of paper currency is a large risk exposure. Unfortunately, federal banking regulations have limited cannabis-touching businesses to dealing mostly in cash. This makes cannabis companies a prime target for crime, theft and fraud. Dispensaries and retailers have resorted to installing the latest in security technology, even reinforced bank style vaults – but these methods serve only as a first line of defense and are not without flaws. Holding an crime insurance policy with a degree of crime and theft coverage is key to protecting cannabis businesses when steel walls and fancy surveillance cameras fail. While insurance coverage is available for cash and theft, most policies will limit the coverage to a mere $1 million. This creates considerable gaps in coverage as most cannabis businesses may have considerably more than that on-site. Until banking regulations give the cannabis industry the ability to operate as legitimate businesses with the stability and safety that would deter criminal activity, some degree of crime and theft coverage is needed to help manage the risks associated with being a cash-based business.

In addition, cash isn’t the only target. The very nature of the product itself, cannabis in its many forms has high monetary value and, as the old saying goes, is “worth its weight in gold.” At some locations there are millions of dollars of product on site. This leads to the importance of theft and loss prevention by taking proactive steps including: proper pre-employment screening and cultivating a loyal staff; being diligent about regular inventory checks; having strict security requirements on company policies; having motion detection cameras to cover all areas where cannabis product is held; a centrally monitored security alarm system; as well as investing in multiple vaults and biometric safes with warranties to protect finished stock. Investing in loss prevention is a sound business decision, and at Pak Insurance Programs we specialize in cannabis and hemp insurance – helping clients prevent and manage downside risks, while navigating the market to find the best available crime insurance solutions to ensure coverage is appropriate. Our team of experts take time to understand your business operations and build a customized comprehensive program that can help protect your business from the unexpected. 

For more information or to receive a competitive quote, contact Peter Riskind – Director of Cannabis & Hemp Insurance for PAK Programs at Peter@pakprograms.com or call 888-386-5701 X-223. Visit our cannabis insurance website at: www.pakprograms.com/cannabis-hemp

Presented By Peter Riskind – Director, PAK Insurance Programs – Cannabis & Hemp Insurance

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