The Cannabis Effect On Life And Disability Markets

    The leaves and buds of the marijuana plant have been cultivated and used by humans as medicine and as a euphoria-inducing agent since ancient times. Its earliest references date back to China in the early third millennium B.C. where it was used to treat gout and rheumatism. Cannabis later made its way to India and then to North Africa where it was popularized as a recreational drug in lieu of alcohol which was banned by traditional Muslim teachings. By 500 A.D. it had landed in Europe.

    Spanish explorers brought marijuana to the New World in 1545, but it wasnt introduced to the English colonies until 1611 in Jamestown where cannabis became a major commercial crop for farmers as a reliable source of fiber. Eventually the marketability of cotton and tobacco spread throughout the southern states and replaced the marijuana harvest in the U.S. Pot use dwindled in this country until the twentieth century.

    According to many historians, the post-World War I Jazz Era as well as Prohibition led many Americans to turn to the recreational use of marijuana, creating a burgeoning demand. Meanwhile, government research, political posturing and increased legislation heralded by the Federal Bureau of Narcotics culminated in a nationwide crackdown on pot. Cannabis was tagged the gateway drug to narcotics addiction, and its use became widely illegal.

    Ever since Reefer Madness was released in the 1930s, through the counterculture era of the 1960s, to the beginning of this century, the American majority remained at war with weed. Marijuana has historically been persecuted similarly to harder illegal drugs by state and national legislatures and law enforcement, creating moral hazards that are just now being addressed with the changing views on pot cultivation, distribution and use. Even though it remains illegal on a national level, recent legislation among many states in the union has greatly eased the societal stigmas associated with the use of pot and the taxation and revenue generation of the marijuana industry.

    Cannabis use for medicinal purposes is now legal in 28 states as well as Washington, D.C. Recreational use of marijuana is now legal in seven states as well as Washington, D.C., and after elections last November, several more states will soon be added to both of those lists. It is also now legal to grow between 3 and 12 cannabis plants at your home, depending on what state you reside in. This is possible by trying and purchasing some seeds. Encompassing multiple generations, America has grown more agreeable in its attitude toward herbal intoxicants in the last 15 years.

    That fact has carried over into the insurance industry, specifically the life and health markets. Disability underwriters and life underwriters have become more accustomed to seeing applicants who smoke marijuana or use pot-laced products on a regular basis. In the past, these prospects would have been automatically declined by most life insurance and disability insurance companies. But underwriting methodologies have liberalized to a far greater extent in the past few years, and habitual pot users are generally classified and rated similarly to tobacco users. Preferred life insurance rates for someone that frequently uses marijuana can be four times more expensive than preferred life insurance rates for someone that doesnt partake in pot or tobacco at all. The disability income protection rates of most U.S. carriers reflect a similar pattern, but to a lesser extent.

    Many industry leaders have additionally begun analyzing the pot risk on a scale of use. For example, a person who smokes pot less than once per week may receive a lower rating than a person who smokes pot every day. In many instances, those who are occasional users qualify under cheaper non-smoker rates. Insurance companies have also begun classifying risk differently for those that smoke marijuana versus those that ingest edible products that contain cannabis.

    As insurance companies and their discerning on-staff medical directors become more accustomed to insuring cannabis users, and as the marijuana industry itself expands, the life and health markets will most likely see further increases in underwriting liberalization as the two industries further feel each other out and learn to profitably coexist.

    Although the physiological and psychological effects of long-term use are still widely debated, most Americans who use marijuana can now find sufficient levels of income and asset protection from disability and life carriers in the United States.

    Yet, finding appropriate business insurance for the marijuana industry itself remains a substantial challenge for insurance agents and financial advisors. Millions of dollars in capital are being raised all over the country by interested investors looking for big returns on start-up growing and distribution businesses, who are in themselves turning to companies who specialize in seed to sale software to help them maximize their profits, and those investors are wanting to hedge their bets in the fledgling industry with large amounts of life and disability insurances.Other kinds of production, such as Private Labeling CBD Products, are also becoming more and more prominent in the industry, which in turn is opening up many opportunities for many Americans. Unfortunately, the traditional American markets won’t yet entertain corporate insurance for pot businesses or personal insurance for those working in those businesses. They commonly report that the moral risks are still too high for comfort. However, the international marketplaces and the surplus lines carriers seem to be more receptive to those prospects.

    Insurance syndicates at Lloyds of London are writing personal disability and accident insurances on those working in or running cannabis companies, including growers, wholesalers, and retailers. Most policies do exclude claims arising from drug abuse/misuse including the taking of marijuana. But those generally-progressive overseas underwriters too have shied away from providing financial protection for the cannabis businesses themselves.

    Yet, business insurance solutions do exist for the corporate pot world. There are a few sources in the greater London market that have already adopted a more receptive attitude, and see a fast-approaching legal, regulated and flourishing future for the marijuana industry in America. They are willing to write contingent death benefits for key person, loan indemnification and buy/sell insurances on the lives of the owners and operators of the multi-million dollar distribution companies and grow operations popping-up throughout the U.S. They are also beginning to entertain offering business disability insurances for the marijuana industry.

    With regards to the blossoming cannabis industry, the most glaring roadblock to their insurance needs is that the use and cultivation of pot is still illegal, in various forms, among many states and in the eyes of the federal government. But considering ongoing media coverage and the obvious changes in ideals of the voting public, it is apparent that Pandoras Box has been opened and the tide of legalization is steadily sweeping across a country with more permissive views towards pot than ever before.

    As the marijuana industry in the United States continues to set its foundations, will domestic insurance carriers and regulators also find a profitable and stabilized future in serving the cannabis market? Only time will tell, but that is where our insurance and financial markets are headed.

    Joe Russo is an underwriter and account executive at Petersen International Underwriters. With over 15 years in the financial services industry, Russo is a “specialty market” life and disability insurance expert. He is also the editor-in-chief of Petersen International’s weekly publication The Communicator. Russo can be reached at Petersen International Underwriters, 23929 Valencia Boulevard, 2nd Floor, Valencia, CA 91355. Telephone: 800-345-8816. Email: