Industries across the U.S. have been adversely impacted by the global pandemic. Here are three ways the cannabis insurance industry has been affected.
The coronavirus pandemic caused turmoil across all industries in the U.S. To be blunt, the cannabis industry is no exception.
Here's how COVID-19 has affected the cannabis insurance industry:
1) “Essential" cannabis made a big difference. Each U.S. state has its laws and regulations regarding cannabis use and production. During the lockdown, many of these states classed cannabis as essential. Medical marijuana dispensaries and shops were still open for business, just like grocery stores, pet stores, and other essential shops.
Cannabis dispensary sales declined during the start of the shutdown, but a recovery period launched the cannabis back into the green. In April, sales stabilized but at volumes averaging 40% higher than 2019, according to a study by LeafLink, Flowhub and Vangst.
2) Insurance complexities have heightened. Every insurance company has an objective to grow its business and attract new clients. However, this year, the circumstances have been unorthodox, and things were not going as planned before the crisis struck. Without legalization, the major cannabis companies won't grow, and new companies won't emerge either. The insurance companies will also have to postpone their growth in the sector.
The states that had plans to legalize marijuana pre-pandemic were forced to put those plans on hold as all attention was diverted to flattening the curve. As a result, canna-businesses in those states may have to wait for better times.
However, glimpses through the fog provide a reason for high hopes. State governors across the country, including New Jersey and Pennsylvania, have called for the legalization of marijuana as a solution for replenishing exhausted state funds from the efforts of combating COVID-19.
3) Reinsurance is still a weak link. When it comes to reinsurance for cannabis plans, it's understandable that it will be even harder for every insurance company to find a partner in this business. Everyone in the insurance world is waiting to see what the future will bring, and no one can predict what will happen next. The fear of the unknown in the insurance business in general may make reinsurers hesitant to branch out into new markets.
Bojana Petkovic is project manager, Loud Cloud Health.