Cannabis Insurance Trends in 2024
Understanding key cannabis insurance trends in 2024 will give your cannabis business a competitive edge.
The cannabis industry is changing rapidly.
If you’re a cannabis business owner, it’s in your best interest to keep up with the changing cannabis trends.
U.S. legal Cannabis sales are expected to hit $54 billion by 2027.
But opportunity doesn’t come without meaningful risks.
Fortunately, understanding the latest cannabis insurance trends will allow you to create a robust risk management strategy for your cannabis business.
So, let’s get into it!
The Cannabis Industry Outlook in 2024
Before we discuss the cannabis insurance trends in 2024, let’s understand the cannabis market outlook for 2024.
The Cannabis Market Is Growing
While challenges persist in mature markets, the industry is poised for continued growth. From the opening of new adult-use markets to innovative product categories gaining traction, it is safe to say that the US legal cannabis market will continue to expand through 2030.
Impact of Competition on Cannabis Pricing
On the other hand, competition in established markets is driving down prices.
However, data from BDSA shows that the average retail price of cannabis has fallen by 13% in mature markets due to increased competition.
Increased competition and generally decreasing prices in established markets have resulted in higher cannabis consumer participation.
Fastest Growing Industry Worldwide
BDSA also points out that new legal markets are opening up every year, making cannabis one of the fastest-growing industries globally. They project a 10-15% increase in total U.S. cannabis sales for next year.
Cannabis-Specific Risks vs. Cannabis Insurance
Let’s understand some of the challenges faced by the cannabis industry:
The Environmental & Climatic Issues
The U.S. experiences about 1,248 tornadoes every year on average. However, the environmental and climatic threats also include wildfires, storms, and a plant pathogen, HLVd*, that could cost growers billions.
*HLVd is dangerous because it silently weakens cannabis plants, reduces yields, and destroys the very quality (THC content) that makes the crop valuable.
As per their survey, 62% of respondents to their survey consider climate change and natural disasters as top risks to profitability.
A Wave of Optimism — Presidential Elections 2024
InvestorPlace's assessment reflects optimism, calling 2024 an exciting era for the cannabis sector, potentially fueled by political backing and the official announcement of rescheduling.
One major reason why businessmen and analysts foresee policy changes is the upcoming elections in November 2024.
Experts believe that SAFE Banking and de-scheduling would make the cannabis industry significantly more profitable. This optimism is shared by insurance specialists who are planning to expand their services and product offerings in existing and new markets.
While it’s still too early to derive any conclusions, it’s safe to consider the overall outlook for the cannabis industry in 2024 as positive, with growth expected despite challenges.
Challenges for Cannabis Businesses in 2024
Here are a few challenges that cannabis businesses must be especially prepared for:
- Obtaining Insurance: Insurance options are limited due to the high-risk perception and complex regulations.
- Compliance: Strict adherence to state regulations and a robust risk management plan are essential for securing coverage.
- New York Medical Marijuana Insurance: A new bill requiring insurance coverage for medical marijuana could significantly impact the market, but details are still emerging.
Challenges for Insurers in 2024
For insurers, there are a lot of challenges they must navigate to establish their reputation and credibility in the industry. These include:
- Lack of Industry Knowledge: New agents need to learn the intricacies of the cannabis market to be competitive.
- Policy Complexity: Cannabis insurance often involves proprietary forms and unique risks, requiring in-depth understanding from agents and underwriters.
- Unique Risks: The industry presents a blend of risks - consumer packaged goods, pharmaceuticals, and federally prohibited activities.
- High-Risk Activities: Cultivation facilities, transport companies, and dispensaries all handle significant assets, creating insurance challenges.
- Federal Status: Cannabis remains a Schedule I drug federally, hindering legal status and business operations (banking, taxes, interstate commerce).
- Local Regulations: Meeting local government insurance requirements (e.g., dispensary coverage amounts) can be difficult due to limitations from insurers wary of federal banking restrictions.
The bottom line is — threats persist, but only the cannabis businesses backed by adequate cannabis insurance and risk mitigation strategies can navigate them with peace of mind, allowing them to focus on their core business operations, and excel in this industry.
If you’re a cannabis business owner looking for cannabis risk management experts, or tailored cannabis insurance coverage for your companies — contact Frontier Risk now.
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