Leaders in the insurance industry are largely still hesitant to work with cannabis-related businesses, although a few big names have thrown their hats into the ring.

Aon and Berkshire Hathaway are two large insurance providers, but nervous investors means that cannabis insurance rates are much higher than they otherwise would be. What gives investors pause? The illegality of cannabis at the federal level is a major factor, but not the only one. Working with cannabis still has a stigma attached to it for some, and insurance providers are afraid of offending current and future clients by working with cannabis.

For a cannabis-related businesses to obtain insurance, it is a chore to find the right coverage for a reasonable price. While insurance providers are stalling, the need for their services continues to grow rapidly. Cannabis is currently legal in Canada and 10 U.S. states for adult-use, and that doesn’t just mean cultivators and dispensaries. Legalizing cannabis means every step of the production chain needs to be licensed and insured: from distribution to lab testing to extraction.

And the hesitation of the insurance industry means that every step of the production process requires insurance at high rates. This multi-billion-dollar industry in the U.S. has a long way to go before that change. Big, international firms like Lloyd’s of London refuses to write policies for cannabis-related businesses that are located in countries where cannabis is federally illegal, which includes the U.S. Canada is in a better space, as it is federally legal there and Lloyd’s of London marketplace can now cover companies in Canada.

Even though insurance is hard to come by for cannabis-related businesses, especially in the U.S., there are still more options available than there were six years ago. More insurance companies are offering products that cover the needs of the cannabis industry, but the lack of competition and the high perception of risk has kept prices high. Rates can be 10 times higher than they are for businesses outside of cannabis.

Just finding any insurance provider to write these policies isn’t a good option, either. Cannabis is new to the eyes of insurance assessors and they need to know what to look for and what questions to ask in order to write a policy that will actually provide protection. While the cannabis industry isn’t so different from other agricultural or manufacturing industries, the specifics can be very different and the regulations around cannabis are much stricter.

The amount of cash that cannabis-related businesses must deal in also makes insurance providers nervous. Large amounts of cash can make businesses prime targets for burglary, and cannabis-related businesses are often forced to keep large sums of cash because of the lack of support from financial institutions. Banks are also federally regulated and have not received clear direction on how they can work with cannabis companies without drawing federal ire.

The Secure and Fair Enforcement (SAFE) Banking Act would change that if it passes Congress, but after a successful vote in the House of Representatives, it faces a tough challenge in the Republican-controlled Senate. Even though cannabis banking has proven to have a fairly bipartisan interest, there is still hesitation and an unwillingness to move it forward by the GOP.

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What do you think are the biggest insurance challenges that the cannabis industry faces? Let us know in the comments.