Why Insurance Premiums Are Increasing in the Cannabis Market
In 2025, the global cannabis insurance market reached $2.4 billion in annual premiums written and is expected to reach $7.2 billion by 2033, according to Growth Market Reports. Additionally, the industry added an estimated $115 billion to the U.S. economy in 2024, and there are now nearly 15,000 dispensaries operating across the country, according to Cannabis Risk Manager.
As more states legalize cannabis for recreational and medical use, the cannabis industry continues to grow—driving expansion in the insurance market as well. Yet, as the market has matured and become more segmented, so too have carriers’ experience and data, leading to a market that can now be considered more sophisticated than ever when it comes to pricing risks.
The cannabis market “is one of the fastest growing specialty segments,” explains Julia Merritt, cannabis commercial underwriter at Burns & Wilcox. “But over the past year, we have started to see it mature quite a bit.
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“Carriers are underwriting more carefully and they’re asking better questions,” and “pricing is more closely related to real loss experience rather than future growth expectations,” Merritt says. “The market has clearly shifted from a growth mode to a sustainability mode.”
Carriers can now rely on credible loss data that “allows them [carriers] to draw a sharp line between operators with engineered, disciplined controls and those still relying on legacy processes or retrofitted facilities that weren’t built with cannabis in mind,” says Kieran O’Rourke, director of underwriting at Cannasure Insurance Services.
However, as in other markets, differing segments of the cannabis market are experiencing varying changes in rate increases. One significant statistic relates to property renewals for indoor growing operations, which have posted premium increases of between 25% to 40%, while commercial auto premiums for cannabis fleets are running two to three times 2024 levels, according to Cover Cannabis.
In most segments of the market, “underwriting has tightened, most notably for cultivation risks that aren’t using LED lighting or extraction risks using volatile solvents in the extraction process,” says Lee Woodruff, vice president, cannabis practice, Jencap Insurance Services. “Carriers are still cautious, and that shows up quickly in terms, pricing or even general appetite.”
While there are exceptions to rate increases based on loss history or specific risk characteristics, a number of issues are adversely impacting the cannabis industry across the board.
“We’ve had a number of fire losses tied to electrical overload or inadequate extraction engineering,” O’Rourke says. “We’ve also seen more frequent spoilage claims from equipment failures and rising crime claims.”
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“The assailants are getting more sophisticated in their burglary attempts, which lead to more vandalism than actual theft, yet these are significant losses being incurred at dispensaries,” O’Rourke explains.
Additionally, inflation is also impacting the cannabis market. “Businesses have been undervalued for years—stock, equipment, tenant improvements and buildouts,” O’Rourke says. “As valuations correct upward, premiums move with them.”
Also, litigation frequency has accelerated. “Potency variance suits, labeling disputes and consumer class actions are now part of the risk landscape,” O’Rourke says. “Even when settlements are modest, defense costs are not.”
“Together, these factors have pushed carriers to tighten forms, raise retentions, narrow product definitions and exercise much more discipline about who they’re willing to put limits behind,” O’Rourke summarizes.
Independent agents play an important role in helping clients manage their risk adequately as the market continues to evolve, “by helping their clients focus on risk management and not just the transaction,” Merritt says. “They can also make sure that values are accurate, security systems are in place and maintained, and employee training is documented.”
By “delivering complete, professional submissions, including process flow diagrams, engineering reports and loss control evidence; encouraging investments in engineering controls; promoting fleet telematics and driver coaching; and completing accurate valuations, agents can position themselves as risk advisors rather than rate shoppers,” O’Rourke says.
Olivia Overman is IA content editor.
