Insurance giant Lloyd’s of London is no longer providing insurance for businesses operating in the cannabis industry. While the comprehensive possession and use of medical marijuana is legal in 23 American states and in Washington D.C., legalization at the federal level could take years, and the British insurance marketplace is no longer waiting for this major change.
Instead, Lloyd’s of London chose not to renew existing cannabis insurance policies in the United States, and stopped working with new marijuana industry clients in May 2015.
Many business owners are concerned about the effect of Lloyd’s of London’s sudden exit from the marijuana insurance industry. There aren’t many insurance companies that offer specialized coverage for cannabis businesses, such as growers, labs, or dispensaries, as the widespread legalization of marijuana is still far from complete. As soon as the non-renewable marijuana insurance policies end, thousands of business owners will have to look for new insurers. With Lloyd’s of London (temporarily) exiting the marijuana scene, smaller insurance companies will be able to offer their services to cannabis businesses across the country.
How will Lloyd’s of London’s departure affect the market?
But is the exit of a big player a positive change for the industry as a whole? If such a big market is suddenly refusing to offer insurance to cannabis businesses, who is to say how other insurance companies will react? Many insurers are already skeptical of genuine claims — what’s worse, they have every reason to be skeptical in this situation, as Lloyd’s of London hasn’t publicly disclosed the reason why they chose to end their collaboration with the cannabis industry. Were their losses too great? Were they intimidated by the possibility of unknowingly violating federal anti-money laundering laws? Are businesses operating in the marijuana industry too difficult to insure? Whatever the reason behind the decision was, it seems quite illogical to step out of an industry that is getting showing indisputable growth amidst calls for legalization.
Lloyd’s of London’s break with the marijuana industry is also unsettling to business owners who are fighting for the acceptance and legitimization of their line of work. The distance kept by a reputable insurer might indirectly lead to lower trust levels from potential clients. Buyers can be influenced by the decisions made by big corporations and markets, and some will certainly see non-insurability as a blemish on the surface of the marijuana business.
The possible upside to this situation is the opportunity for smaller marijuana insurance companies to get noticed, as dedication is by no means tied to the size of an insurance company. In fact, specialized insurers can often provide better insurance policies to marijuana businesses.
Lloyd’s of London’s decision might have an immediate negative impact, but in the long run, insurers who are truly interested in the growing marijuana industry will get a better chance to succeed in a competitive market.