Why brokers should embrace the risks posed by Cannabis Act

Published: October 12, 2018

Updated: November 1, 2018

Author: Luke Jones



On Oct.17, the federal government’s Cannabis Act will come into effect and allow Canadians to consume, buy, and grow marijuana for recreational purposes. Across insurance lines from home insurance to auto insurance and solutions in-between, there will be more risk from legal pot.

While there is much to debate, insurance is a risk business and the Cannabis Act will increase risk. With that in mind, brokers should be embracing the opportunity for expanding lines across new avenues around marijuana legalization.

Market research and knowledge of the laws will help brokers get a head start:

“The key for brokers is to make sure they’re well educated about the product and the market. They need to understand cannabis from where it starts with the seed, through the growing process and through distribution. They need to study how the different processes and facilities work, and what risks they entail,” said David Kerr, client executive at Canadian insurance brokerage and strategic consultancy, Jones Brown, and speaker at the upcoming Cannabis Cover Masterclass Toronto 2018.

“The more you educate yourself about cannabis, the more you’re going to be able to assist your clients in understanding their business interests and provide them with the best tools to cover their risk management needs. Understanding the coverages and the different policy nuances is also important for brokers. Some policies include significant exclusions that would result in a claim being denied, which is the last thing a broker wants for their client.”

Challenges of Education

While education will be important, it won’t be necessarily easy. Firstly, while the Cannabis Act is universal across the country, each province is free to govern the legislation under its own regulatory framework. That presents problems for brokerages that work across provincial lines, who will have to ensure employees are

Secondly, cannabis act legalization is unchartered territory without any historic data and only some incomplete markets to compare to. In other words, there’s little material for brokers to learn from. Brokerages will be left to learn on the move and adapt solutions towards changing customer situations and the market that develops around the Cannabis Act.