The cannabis sector is moderating in 2025, with sales up but product prices down 10 percent, according to Hub International’s 2025 Cannabis Outlook Executive Survey. That’s a demanding scenario for industry businesses, which often struggle to find the right insurance. The Hub report notes about 75 percent of industry respondents stated their organizations “don’t have adequate insurance to protect against risks that will harm profits. Companies are often left with a choice between unaffordable rates and no protection.”
Cost remains a big issue, too. A “tight market” for commercial auto insurance means premiums for product transportation within the industry have tripled. “Rising costs and low capacity have made it challenging for cannabis businesses to secure appropriate coverage,” the report noted.
It’s not only higher insurance prices and lower sales revenues that are vexing operators this year. Among the other issues also weighing on company decision-makers is the lack of adequate coverage due to a paucity of insurance providers.
“The current state of cannabis business insurance is quite restricted, with limited insurers willing to participate due to the high-risk perception and regulatory complexities,” said John Crist, founder of Prestizia Insurance in Dallas.
Cultivators and retail stores, in particular, often struggle with obtaining adequate coverage. That’s partly by design, as insurers weigh the risks of offering coverage in a relatively young marketplace.
“Best practices for these businesses include maintaining stringent compliance with state regulations and demonstrating a thorough risk-management strategy,” Crist said. “For instance, a cannabis retail client in New York had to implement extensive security and inventory-tracking systems to meet insurance requirements, which underscored the meticulous level of compliance needed.”
Without a doubt, insurers need to do a better job of understanding what cannabis companies need. Insurers must do their homework and figure out what makes firms tick to craft the correct coverage. That’s especially the case at the customer-facing agent level.
“One of the biggest challenges for new agents is the ability to learn and understand the business and marketplace,” said C.L. Mike Schmidt, an attorney with Schmidt & Clark LLP in Santa Fe, New Mexico. “There are a lot of ins and outs that an agent should attempt to learn so they’re well-equipped to serve their clients. When it comes to underwriting the risk, agents must comprehend that the majority of policies are written on proprietary endorsements, so knowing the ins and outs of each carrier’s form is critical.”
Cannabis businesses need to protect themselves, too. Sector companies are going to have to dig deep, especially in key areas like risk-management and organizational resilience, in an environment where many companies are a single weather disaster, supply chain, or data fraud incident away from significant financial damage.
“Organizations that focus on organizational resiliency efforts will be poised for success through the implementation of a robust business continuity plan that can pressure-test these potential loss scenarios,” the Hub outlook report noted. “An insurance advisor with cannabis industry expertise can help educate both the buyer and the seller on best practices, making sure businesses secure proper runoff or [directors and officers] policies to protect the bottom line.”
Companies have faced myriad challenges getting insured and will need to show patience as the insurance industry resets in a volatile year.
“The cannabis insurance market is characterized by a hardening trend, meaning premiums are rising while insurers are implementing stricter underwriting requirements,” noted CoverCannabis’s 2025 Cannabis Insurance Outlook report. “Factors driving this trend include heightened regulatory scrutiny, an increase in product liability claims, and risks associated with emerging consumption methods. This environment makes it harder for businesses to access affordable and comprehensive insurance coverage.”
In his role as analyst for InsuranceQuotes, Brian O’Connell studies the insurance industry and provides tips, advice, and insights. A former Wall Street trader, he is the author of the books CNBC’s Creating Wealth and The Career Survival Guide. His commentary regularly appears on major media platforms like Fox Business, U.S. News, The Motley Fool, and TheStreet.
