First Admitted Insurance Carrier in the Nation Approved in California

Golden Bear Insurance Co. will likely take a Big Bite out of Existing Non-Admitted Insurance Markets

Well, it finally happened with Golden Bear Insurance Company was approved by the California Department of insurance to offer coverage through an admitted insurance program for marijuana companies. This is a really big deal for those of us who specialize in marijuana insurance because historically, this line of insurance was offered only from “non-admitted carriers” specializing in “high” risk.    This will be a bigger deal to the marijuana industry as they begin to benefit from either better pricing, coverage availability, and friendlier claims practices. 

The primary difference between admitted versus non-admitted carriers is admitted are approved by the Department of Insurance through what is known as a rate filing.  This means their policy forms, underwriting, and pricing are reviewed by a regulatory agency before approved  and offered to the public.  The non-admitted insurance market avoids this approval process leaving the cannabis business with fewer options.

According to our sources, Golden Bear decided to take a chance on the cannabis industry with plans to carefully underwrite California cannabis companies particularly in the early stages.  They don’t plan to offer coverage outside of California until they’ve gained comfort within the cannabis industry.  In our opinion, this is prudent with any new program because one loss would likely sound off the alarms.  Apparently, they have been flooded with inquiries and even submissions despite the programs recent approval on 11/01/2017.

Currently, there are several California based marijuana surplus lines brokers who offer coverage through non-admitted insurance carriers seriously contemplating how Golden Bear will impact their futures. The news of an admitted insurance program is not welcoming as these surplus lines brokers with comprehensive cannabis insurance programs begin to realize their days may be numbered.   

An immediate drop in new applications will be felt by the non-admitted insurance market because of a regulatory requirement.   California retail insurance brokers are required to seek coverage from Golden Bear or any admitted carrier because of a form known as a “diligent search report” before securing coverage.  California is not unique with this requirement.  Many states obligate the insurance broker to conduct a search to verify if a business can qualify for coverage from an admitted carrier before offering the non-admitted option.  Based on our understanding, the reason for the diligent search report is meant to protect the customer from being insured with deficient coverages or purchasing a more expensive policy.  

California Department of Insurance Filing Approval

The filing at a glance shows Golden Bear Insurance Company approved for their California Cannabis program. 

Approved filing for Golden Bear

Is The Admitted Insurance Market Ready to Insure Pot?

Is The Admitted Insurance Market Ready to Insure Pot?

The Golden State Could Be a Game Changer for the Marijuana Insurance Industry

Breaking news out of California when The Californian reported California Insurance Commissioner Dave Jones wants admitted insurance carriers to insure marijuana. This will not be an easy task for Commissioner Jones considering the fact Lloyds of London does not offer insurance to the marijuana industry.

For those who may not know, admitted insurance carriers are well known companies approved and subjected to regulation by the state in which they operate. Admitted insurance carriers are typically companies like Travelers, Hartford, Farmers, and State Farm to name just a few. Historically, these companies have no interest in insuring marijuana.

Currently, the cannabis insurance industry purchases insurance through the non-admitted insurance markets. There is less competition, more stringent underwriting, and limited coverage offerings. For example, product liability and directors and officers insurance is extremely difficult to procure. The few insurance carriers offering the coverage dictate the terms leaving the cannabis business with few options. In our experience, most cannabis businesses simply opt out of insuring these risks all together.

If Commissioner Dave Jones is able to convince admitted insurance carriers to start insuring the cannabis industry, those carriers will need to carefully analyze the underlying risks, federal challenges, and repercussions to their reputation in states that are less cannabis friendly. We know that insuring of medical and recreational marijuana businesses has been profitable to the non-admitted insurance markets when distributed through the right channels. The most common claims have been theft of cannabis and employee injuries at a profitable level. Based on our knowledge product liability claims are rare.

The fact that marijuana remains a schedule 1 drug will have admitted insurance carriers analyzing any governmental contracts that could be terminated. The impact on their reputation will be perhaps the most difficult to predict. The majority of the United States ( 29 States) has either recreational or medical marijuana laws may lessen the impact the first time a consumer in Arkansas sees their local agent advertising they sell marijuana insurance.

Admitted insurance carriers typically have either dedicated captive agents or independent brokers who by contract represent that particular carrier. The amount of competition and access to these types of insurance products will indeed offer the cannabis industry access to insurance products they never thought was possible.

The non-admitted insurance industry will be out of business if Commissioner Dave Jones gets his way

The impact on the non-admitted insurance industry will be devastating as clients flock to those retail insurance brokers or agents for better pricing and coverage options. Like Commissioner Dave Jones stated in The Californian more insurance carriers competing is good for the industry with better pricing and coverage options.

California could be the tipping point for the insurance industry as thousands of businesses prepare to become licensed and operate in the golden state.