Cannabis businesses are facing contentious politics at all levels of government and ongoing financial concerns. In addition, worker injury accidents are very common within marijuana dispensaries, and weather conditions have been ruining many crops, along with the all too common inadequate quality control.
Many cannabis businesses are now calling for tougher safety rules for ingredients and devices used for their products as health officials continue to undergo an investigation for a wide range of products and chemicals that may lead to illnesses.
The Ins and Outs
The cannabis industry is still in its infancy and faces unique types of risks. The driving force behind many of these risks is not inherent in the products themselves but mainly due to cannabis’s negative perception. Risks are coming from outside the industry and inflicting on these business owners.
Regulators, politicians, and the media have strategically created a large portion of the industry’s risks, like not permitting legitimate banking activities. Because cannabis is still classified as a Schedule I drug, cannabis businesses cannot work with federally insured banks, forcing transitions to be done with cash. This creates a risk for a business to get funded, as it is difficult to obtain proper financing.
Other sectors avoid working with the cannabis industry, either because of its status with the federal government or simply because it is perceived as a risky business.
For instance, affordable property insurance is often difficult to secure because of a lack of options and insurers attempting to understand these companies’ risk profiles.
Insurers for this industry are not worried about the same things that traditional underwriters are.
The Risks Explained
The three biggest risks are:
The people issue
There is a lack of people to grow businesses in this market that heavily favors job seekers. There are more jobs than there are applicants.
Although it is a good job market across most industries, compounding this has been rapid growth in the cannabis industry, which has a very strong draw for Millennials. They don’t tend to be as loyal to employers as past generations because they are much more likely to switch jobs frequently.
Media and other communications channels
Mainstream media has played a huge role in how the public has viewed the industry. It is often thought of as negative or “freewheeling,” which has not helped the companies in their efforts to get permits needed to operate from local governments, gaining broader public acceptance, or purchase insurance.
The press has cast a negative light, and public perceptions have been very challenging for the industry. Even people within the industry often find themselves not knowing what to believe.
Financial risks (banking; payment processing; financing; and funding)
Business owners are staying hopeful for the passage of the Secure and Fair Enforcement Banking Act or SAFE ACT to address some of the financial risks.
However, the cannabis industry is still so young, which is a legitimate concern for lenders and insurers. Many financiers are often opposed to partnering with those who are in what they may consider a “grassroots” industry.
About Thayer Innes and Freeman Bunting Insurance Agencies
At Thayer-Innes Insurance Agency and Freeman Bunting Insurance Agency, we strive to provide comprehensive insurance solutions to support Ann Arbor homeowners. Our homeowners’ policies can be tailored to meet your specific risk exposures and provides much more coverage than a traditional policy, giving you the peace of mind you deserve. For more information about our products, contact us today at (855) 395-6316.