Magazine article Risk Management

Marijuana: The Implications of Legalization for Insurance and the Workplace

Magazine article Risk Management

Marijuana: The Implications of Legalization for Insurance and the Workplace

Article excerpt

How quickly things change. In 2010, the federal Office of National Drug Control Policy published a fact sheet outlining the pros and cons--mostly cons--of what marijuana legalization would mean to the country. From a financial and health perspective, the fact sheet suggested the country would go up in smoke, as it were. The criminal justice system would be negatively affected, it claimed, as would our overall mental and physical health.

Four years later, in a now-famous January 2014 New Yorker interview, President Obama admitted to smoking pot when he was young. "I don't think it is more dangerous than alcohol," he said.

Following the interview, advocates for legalization sprang to action, circulating new petitions asking for marijuana to be removed from the Schedule I list of drugs, where it is classified with LSD, ecstasy and heroin. Congress responded with a note to the president from 18 members saying, "We request that you take action to help alleviate the harms to society caused by the federal Schedule I classification of marijuana." Never mind that President Obama, in the same interview, had gone on to state why he felt legalization would be a bad idea.

As of March 2014, 20 states and the District of Columbia have legalized medical marijuana. On Nov. 6, 2012, two states--Colorado and Washington--became the first to legalize marijuana for recreational use, paving the way for the city of Portland, Maine, to legalize marijuana possession a year later. Possession is allowed for up to 2.5 ounces, although sale of marijuana is still prohibited. The Michigan cities of Ferndale, Jackson and Lansing approved similar laws, allowing possession of less than an ounce of cannabis. Other places, including D.C. in early March, have opted to decriminalize marijuana by reducing the penalties for possession or deprioritizing enforcement of marijuana laws.

The Justice Department elected not to challenge the laws and has left marijuana enforcement policies to the discretion of local governments. Today, nearly 30 states are considering legalizing cannabis use either for medical or recreational purposes.

The Grass is Greener

For the most part, entrepreneurs could not be happier. Estimated sales figures are all over the map--$25 billion annually, according to one Harvard economist, or $40 billion according to Privateer Holdings, a private equity firm helping finance the industry. Marijuana dispensaries are cropping up anywhere there is a legal foothold. An April 2013 estimate put the number of dispensaries at 2,000 nationwide, though figures from 2009 estimated the number of locations at 2,100 in California alone.

It seems everyone wants in on the "green rush," and no wonder: medical marijuana profits come in at $1.5 billion annually, according to Privateer. That is a lot of green for a substance that remains illegal at the federal level.

Now the specialty insurance market is capitalizing on the cannabis craze as well. Specialty insurance products cover most anything cannabis-related, including physicians who recommend the product, dispensaries, growers, crops, landlords and even special events like medical marijuana conventions.

For JB Woods, a marijuana insurance brokerage was a conscious career move. After more than 20 years in insurance, Woods left a career with Allstate and found a new path in the form of a specialty brokerage supporting the medical marijuana industry. Woods said the buzz about medical cannabis use in his state made the choice a no-brainer.

Five years in, as the owner of Greenpoint Insurance Advisors in Parker, Colo., Woods works with five domestic carriers, an excess and surplus syndicate, and Lloyd's of London to place coverage for his clients' businesses. By his estimation, carriers are trailing behind, still trying to understand the industry's needs and risk exposures.

Insurers are also looking to work with brokers that have a certain level of comfort and experience in the marijuana industry. …

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