Buying some green bud at a dispensary shouldn’t be much different than purchasing a green pepper at the supermarket.
That’s how Rocco Petrilli, a long-time insurance and risk management consultant to the auto industry, sees it.
Petrilli, like many who saw opportunity in the emerging cannabis business and made a move, is now chief operating officer and board chair of the National Cannabis Risk Management Association.
Among the many goals of the newly formed group, NCRMA’s primary aim is to make its 2,000 members better consumers of insurance.
The Pittsburgh, Pa.-based nonprofit reports that it relies on funding from membership dues, and is not licensed to sell insurance. The group is partnering with insurance carriers and brokers, it makes insurance recommendations, and members can click a link on the group’s website to get a quote from Conway E&S, a wholesale broker in Warrendale, Pa.
NCRMA membership follows the map in terms of where marijuana is legalized. Most of the group’s members are companies in the adult-use business on the West Coast, though they have reported a pick-up in membership coming from businesses in medical marijuana states.
The concepts of insurance and risk management are relatively new to the cannabis insurance industry, unlike established industries, where risk management is “part of the table setting,” Petrilli acknowledged.
The group formed late last year after its founders recognized the need for the development of solid risk management practices in the emerging industry, which for cannabis, Petrilli believes should be along the same lines as the multifaceted process of taking a crop, such as a green pepper, from the fields and getting it into a buyer’s hands at the supermarket.
The difference is that in the cannabis industry, best practices and clearer guidelines are desperately needed to address some growing issues of concern, such as how much cannabidiol (CBD) or tetrahydrocannabinol (THC) these products have in them.
That’s an understandable, considering numerous reports have lately emerged about products with amounts of CBD or THC being sold that are vastly different that advertised.
In a recent Associated Press investigation, for example, a reporter in Los Angeles purchased five vape cartridges advertised as delivering smokable CBD, but lab testing showed two of them contained synthetic marijuana.
“Those are the issues that really bring risk management to the forefront,” Petrilli said, adding that the cannabis industry needs “a complete overlay of quality control and quality assurance.”
One key, he said, is to generate more data through process of quality control and assurance, as well as funding more research that shows the effectiveness and safety of cannabis products.
“The whole issue we’re facing is, from a medical community standpoint, we don’t have the clinical data,” he said. “We proved out the safety of that green pepper centuries ago.”
The group is also taking a role in public policy.
It’s supporting both the SAFE Act and the CLAIM Act.
The Secure and Fair Enforcement (SAFE) Banking Act was introduced in March to protect banks and their employees from liability for federal prosecution when dealing cannabis companies.
The CLAIM Act was introduced on July 22 by US Sen. Bob Menendez, D-NJ. It promises to do for insurance what the SAFE Act would do for banking. The bill was introduced a week later in the House by U.S. Rep. Nydia Velázquez, D-N.Y., and Rep. Steve Stivers, R-Ohio.
H.R. 4074, and Senate Bill 2201, the Clarifying Law Around Insurance of Marijuana Act, states that an insurer engaging in business with a cannabis-related company or a service provider or in the cannabis sector engaged “in a transaction permissible under state law related to cannabis, and the officers, directors, and employees of that insurer may not be held liable pursuant to any Federal law.”
“Any act by the federal government that works in the direction of decriminalizing cannabis is good for the industry and its growth,” Petrilli said.
However, from a risk management perspective, the SAFE Act would be a bigger help to the cannabis industry, he added.
“We at the NCRMA feel that that’s much more desperately needed,” he said.
Without it, cannabis businesses are in the position of having to deal in cash and harbor a lot of cash, which, he said, “does nothing but increase their risks. Safe banking is absolutely necessary.”
The CLAIM Act may encourage more insurance players to enter the cannabis market, but until there’s significant historical claims data, Petrilli doesn’t see a big impact on premiums or the availability of insurance products – neither of which he believes favors consumers at this time.
“Until that risk is defined, having more players in the market is not going to guarantee lower premiums or bring more quality insurance products,” he said. “Until that risk is controlled, insurance companies are going to protect themselves with rates and premiums.”
That’s one reason he believes the group is needed so early on in the evolution of the cannabis business, because instilling a good risk management philosophy in the industry now will ultimately help create a positive claims experience.
“The better you control your claims history, the better consumer you are of insurance products,” he said. “If you establish a bad claims history, insurance premiums are going to sky high and they’re going to stay up there a long time.”
