Cannabis Act will result in higher auto insurance premiums

Published: October 28, 2018

Updated: November 1, 2018

Author: Luke Jones

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Canada now allows marijuana to be consumed for recreational purposes following this month’s finalization of the Cannabis Act. Under new laws, Canadians are allowed to grow and consumer pot. Introduced on Oct. 17, the Cannabis Act also changes the auto and home insurance landscape.

We have previously reported on the problems facing home insurance providers, who will move premium assessment on a case-by-case basis.

As for auto insurance rates, they are likely to rise universally, according to the Insurance Bureau of Canada (IBC). In British Columbia, the provincial public insurance company says increased premiums are a certainty following the Cannabis Act.

Driving high is considered impaired driving and will be subject to similar penalties. Among those punishments are increased auto insurance prices. Authorities can suspend driving licenses and will become part of the insurance assessment carried out by the Insurance Corporation of British Columbia (ICBC).

“Everybody needs to be very careful when it comes to using cannabis while driving and using cannabis and then driving after the fact because it can have consequences that right now you don’t know that you’re going to be getting,” lawyer Kyla Lee said.

Among the big changes brought by the Cannabis Act is insurance providers needing to ask home insurance customers if they smoke pot and if they yes, how much.

“One of the big concerns that has been expressed to me over and over [by insurers] is the possibility of people taking advantage of Bill 45, the ability to grow up to four plants in their household, and defining what a ‘household’ is,” says Seth Kornblum, a partner at Beard Winter LLP to Canadian Underwriter.

Homeowner Limits

Homeowners are limited to four cannabis plants grown from licensed seed under the laws of the Cannabis Act. This limit is in place per residence, no matter how many people live in the house. Murray believes some homeowners will inevitably take advantage of this limit and insurers will face a tough task during claims processes.

“I think that’s where you are going to see some sort of grey area with claims happening, because there are people going to be pushing the envelope of restrictions… I suppose insurers could try and put exclusions in there, but because it is legal, I think the best way for them to reflect the risk is got to be on a premium basis,” Murray told Canadian Underwriter. “So, the premiums are going to have to be increased.

“Insurers are going to try and have to get the knowledge as to what their insureds – and their potential insureds – are doing with respect to recreational cannabis and growing it themselves.”