The insurance industry has few options for cannabis-related businesses due to federal prohibition, even though these businesses have a strong need for insurance protection, and Congress now looks like it’s planning to do something about the problem.

While the legalization of cannabis still has strong opposition from lawmakers, the risk involved with having a half-legalized industry (legal/decriminalized in certain states but not at the federal level) is becoming apparent. Minimal cannabis banking services, when any are available, have been putting companies at risk, and many insurers have remained cautious when it comes to diving into the cannabis industry.

That’s where the Clarifying Law Around Insurance of Marijuana (CLAIM) Act comes in thanks to bill sponsor Sen. Bob Menendez, D-NJ,  senior member of the Senate Banking Committee, and cosponsors Sens. Rand Paul, R-KY; Jeff Merkley, D-OR; and Kevin Cramer, R-ND.

The CLAIM Act would do two important things for state-legal cannabis if passed in its current form:

  1. Eliminate penalties for insurance companies who work with cannabis-related businesses. This means not just cannabis license holders, but also the service providers such as attorneys and other companies that work with license holders, would no longer be a liability to an insurance carrier. This will go a long way to remove much of the fear and hesitation that the insurance industry as a whole has felt about working in cannabis.
  2. Prevent federal agencies recommending an insurer not work with a particular business, or downgrade or cancel a current business’s policies, solely because they are a cannabis business.

“Current federal law prevents these small business owners from getting insurance coverage, and without it, they can’t protect their property, employees, or customers,” Menendez stated in a press release announcing the bill. “We can solve this problem with legislation that allows insurance companies to provide coverage to these enterprises without risk of federal prosecution or other unintended consequences.”

While the illegality of cannabis and the problems with providing insurance coverage aren’t the only reasons insurance companies are nervous about managing risk in cannabis, this would prove a major step in the right direction for sensible coverage and policies. Similar in scope to the SAFE Banking Act, these bills would allow the cannabis industry to engage in the normal operations of business just like any other industry. As one of the fastest growing industries in the nation, these standard business services are desperately needed.

Other solutions have been discussed as stop-gap measures until Congress acts. Some have considered captive insurance as a potential option for the cannabis industry, and some states like California have tried to create their own solutions. Neither of those options, however, would have the sweeping positive effects that the CLAIM Act would if passed.

The CLAIM Act was introduced in late July and it remains to be seen how it will fair through the process to become law and what kind of changes are likely to be made to the text. Advocates will be keeping a close watch on this as it develops and makes its way through several Congressional committees and hearings.