Insurers left in a wait-and-see situation following marijuana legalization

Published: November 30, 2018

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Recreational cannabis for Canadian adults is now legal and has been for over a month since the Cannabis Act was enacted on Oct. 17. However, despite the legislation being in place, debate still surrounds the law and how it will affect law enforcement, regulators, and more importantly, the everyday life of Canadians.

Among the areas of confusion is how the insurance industry will handle marijuana legalization. Customers and companies are being left with a wait-and-see approach as authorities organize their regulations. No more is this apparent than in the auto insurance industry.

No-one doubts that cannabis, like alcohol, can make a driver impaired, and law enforcement has said drivers caught drug driving face the same penalties as those drink impaired. However, insurance companies cannot make such snap decisions as and must wait for time to pass before passing any changes to premiums.

“Once insurance providers analyze the data available to them, in most cases, they will need to apply with provincial regulators before they can raise rates,” says Matt Hands, senior business unit manager for insurance at Ratehub.ca. “This means it will take months or even years before Canadians will see the full impact of recreational cannabis legalization on what we pay for car insurance.”

So far, marijuana legalization has not resulted in many reports of drug-driving, while accidents have not been widely reported. What is clear is that there are strict laws and tough penalties in place for drivers caught high behind the wheel. Infractions come with heavy fines and the possibility of having a license revoked or jail time.

“An insurer might even drop you from your policy and potentially label you as uninsurable,” says Hands. “If convicted and you still want to continue driving, you would need to purchase a high-risk policy and the pricing of these policies are generally more than double what a non high-risk driver would pay.”

Speaking to Yahoo Finance Canada, the Insurance Bureau of Canada (IBC) showed tracking data for insurance claims costs across six provinces during 2017. This data came before marijuana legalization and shows Prince Edward Island had an average claim of $500 at the low end of the scale, while Ontario had an average of $1,089.