With 2020 in full swing, the year looks to present a sizable challenge – commercial insurance hikes across most lines of insurance. According to insurance broker Willis Towers Watson’s 2020 Insurance Marketplace Realities, business owners should prepare themselves to face increased insurance premiums across the board. This includes the cannabis industry.
Willis Towers tracked 19 commercial insurance lines that are expected to see price hikes. Several lines of insurance will see an increase in price of 20% or higher, including umbrella, public company directors and officers, and property insurance (amongst others). These lines of coverage will also face capacity withdrawals.
“We’re seeing the biggest upward price shift in years,” Joe Peiser, global head of Broking for Willis Towers Watson commented.
According to Peiser, capacity constrictions and rate hikes are expected to rise throughout 2020 and into 2021. However, he remains optimistic that the market will become more orderly by next year.
“As the market seeks equilibrium, there are reasons for optimism,” Peiser goes on to say. “The alternative capital market is showing renewed enthusiasm for reinsurance; the overall industry has more capital than ever; insolvencies are a rarity; InsurTech is working with market participants to improve the client experience; and the laws of supply and demand still apply. This challenging market won’t last forever.”
As with anything, exceptions to the rule exist. Willis Towers Watson says there will be decreases in price for two lines – international casualty and surety. For another six lines – kidnap and ransom, fiduciary, environmental, political risk, terrorism, and marine will either see price hikes, decreases, or flat renewals.
The Impact on the Cannabis Industry
Concerning the cannabis industry, there will be a few areas that will leave a more significant impact than others. Commercial liability is one such area, which Willis Towers Watson notes, “deteriorating loss trends…continue to negatively impact underwriting profitability.”
This may come as a big hit to cannabis businesses due to the industry’s heavy reliance on commercial liability insurance. Liability insurance allows cannabis business owners to show their suppliers, partners, and customers that they’re serious about the longevity of their business, and provides peace of mind that a net of protection exists should a liability related claim be filed.
Willis Towers Watson notes another area of concern is Auto Liability because the line has failed to generate profit for both commercial and personal insurers. This is driven by an increase in the hiring of drivers, mostly in the trucking industry, which has led to a rise in accidents.
Cannabis dispensaries that offer delivery services are on the rise. Auto liability ensures delivery drivers and the businesses they work for are covered in terms of injury to another party. Cannabis business owners can also add other coverages to the auto liability policy such as physical damage coverage, rental reimbursement, collision coverage, roadside assistance, and more. Auto Liability ultimately allows cannabis businesses to mitigate the costs associated with litigation that may occur due to automobile-related incidents, including coverage for bodily injury and property damage.
When it comes to the cyber landscape, an increasing number of companies have been targeted by devasting ransomware attacks, with hackers extorting businesses for millions of dollars. As such, Cyber Liability insurance premiums also face significant insurance hikes.
Cannabis businesses, just like the vast majority of enterprises that operate in today’s cyber-dominated world, are just as susceptible to cyber-attacks as any other industry.
A successful ransomware attack could lockout systems, with hackers often threatening to leak sensitive company and customer data to the public should the ransom being demanded not be paid. As a result, primary and excess cyber renewals are seeing insurance hikes of 5 – 10% on average.
What can you do to prepare?
With insurance premiums on the rise across the board, what can you do to keep costs down for your cannabis business?
At the moment, experts say you should prepare yourself for what’s currently happening in the insurance industry, and expect it to last well into 2020 and perhaps longer. Your best bet is to speak with your insurance broker to fully grasp how these insurance hikes may impact your business.
“In the long run,” says Pesier. “We urge risk professionals to keep an ear to the ground on the topic of climate risk, which may soon have an impact on the valuation of every business.”
Get a Quote
If you’re looking for an insurance broker who can help your cannabis business navigate these new rate hikes, contact Cannabis Connect today for a free quote.