California Insurance Commissioner Ricardo Lara wrote a new white paper that provides a framework for insurance regulators and how they should address the legal cannabis market. It deals with the medical marijuana sector as well as the recreational market. The goal is to regulate insurance for the cannabis industry in California as well as markets in other states.
California, which is the largest cannabis market in the country, currently has seven providers offering comprehensive coverage to the cannabis market. This is up for just one in 2017 when the state made it legal for insurers to sell cannabis business insurance.
Much for regulators to consider
The quickly evolving cannabis market poses many challenges; nevertheless, Lara proposes some initiatives for the insurance industry:
- Encourage carriers to step up and offer more products to the underserved cannabis industry, including cultivation, manufacturers, testing labs, distribution, and retail.
- Allow those with previous cannabis-related convictions to become insurance producers, agents, brokers, or licensee on a case-by-case basis. This would also enable those convicted under past or current laws to have charges dismissed or reduced to fit current legal standards.
- There will still be oversight regarding the vetting process of insurance producers, which helps protect consumers.
- Another objective is to try and get federal regulators to cease classifying marijuana as a Schedule 1 drug, which makes it impossible for cannabis businesses to access essential business services like banking.
Feds are still the big question
The federal government’s refusal so far to legalize marijuana will continue hamstring efforts in the insurance industry, so the states will have to regulate on their own for now. A good step forward, Lara’s changes would enable the insurance industry to create a framework to serve the industries in a more meaningful way. Because of this regulation, it also could better hold carriers accountable if there are disputes over their services and obligations.