Cannabis businesses need to consider many factors when selecting an insurance broker to help protect their assets, but the most important is the broker’s knowledge of and expertise in the marketplace, says T.J. Frost, U.S. cannabis segment leader for HUB International, an insurance broker that provides business and personal insurance as well as employee benefits across North America.
When trying to determine the right broker for your business, Frost says to consider the following seven questions.
1. Does the broker have other cannabis business clients?
Cannabis business owners face enough risks already without being an insurance broker’s first cannabis client. When choosing a broker, business operators should make sure the broker has other clients in the industry, as well as industry knowledge and experience.
Many insurance policies have cannabis and hemp exclusions, Frost says, and brokers who don’t focus on the industry or don’t know its nuances may unwittingly place a cannabis client with an insurance carrier who excludes all of their operations from coverage.
“We know, as specialists in the cannabis industry, which policies will cover cannabis and hemp operations and which will not, ” Frost says. “Your insurance broker needs to have relationships with the insurance carriers who are willing to tailor coverage for your industry.”
Cannabis companies should partner with insurance brokers that have built practices or verticals around the cannabis industry, Frost says. To determine whether the broker has this experience, he suggests asking what he or she can tell you about the industry, or how he or she has helped other cannabis clients in the past.
2. Does the broker offer expertise and services in addition to insurance?
In addition to insurance coverage, Frost says a broker should introduce his or her clients to employee benefit consultants and certified risk managers who know the cannabis industry and can work with business operators to develop a holistic approach to risk and benefits management.
“At HUB, when we go into a prospect meeting, it’s not just the insurance that we’re talking about,” Frost says. “We’re also talking about if it’s OSHA compliant, how their risk mitigation is going, how their claims process has been handled in the past. Do they have safety experts? Do they have proper training? Do they have employee benefits? You want to talk to a firm that can provide you a holistic approach to risk management.”
Brokers with industry experience can also offer insights beyond insurance policies, he adds. “Say, if it’s security and camera measures, if it’s compliance with OSHA or how to put HVAC units in these [facilities] to get the best circulation—we’ve seen hundreds of facilities. Brokers that aren’t industry experts, they don’t have the ability to advise you on these issues.”
3. What risk management resources does the broker offer?
Ask your broker if they have in-house risk services consultants who can advise you on workplace safety, fleet operations, cybersecurity and more. Accessing these services through your broker (who works for you and will be your advocate with the insurance company) helps ensure that the advice you get will be unbiased and tailored to your needs.
4. How many insurance carriers can the broker bring to the table?
The number of insurance carriers underwriting the risks in the cannabis industry is growing rapidly, and an experienced broker who has solid relationships with these specialty insurance carriers has the best chance of securing optimal coverage and pricing for your business.
5. Can the broker review your contracts and advise you on risk exposures?
Most experienced brokers will provide this service at no additional charge, and it can help cannabis business operators particularly when it comes to owning or leasing a building, Frost says.
“A lot of these policies for building owners have exclusions for contraband or non-federally legal items. And so, if they have a property policy and they’re leasing to a cannabis tenant, obviously that’s not federally legal, and then they don’t have any property coverage,” he says.
Insurance brokers can make sure all the business’s vendors have proper insurance to avoid predicaments when it comes time to file a claim.
6. What experience does the broker’s claims staff have when it comes to cannabis?
If you do have to file a claim, both your broker and your account management team should be committed to advocating on your behalf with the insurance carrier, and they should be experienced in this area.
7. As the market expands, what other services or expertise can the broker offer?
The cannabis industry faces international exposure as U.S. companies go to Canada to be publicly traded on the Canadian Securities Exchange (CSE), Frost says.
“For HUB International, we participate in actively insuring the industry in the U.S. and in Canada, so we’re able to help those cross-border transactions,” he says. “A lot of dedicated cannabis brokers that are smaller, they don’t have the ability to take you cross-border.”
Frost points to directors and officers (D&O) insurance as an example. “There will be private placement [in the U.S.], but then when you go to Canada, you have to do a Canadian placement for D&O,” he says. “If you’re not a Canadian broker or have a relationship there, it’s going to be very difficult to do."
