Changing the legal status of Marijuana has impacted various businesses. Especially when it comes to insurance providers, it has caused them to rethink their business objective and the inherent risk associated with new legislation being passed in the US. Insurers are being prompted to begin offering various new schemes and coverage to their clients following recent marijuana legalization.

How Insurers Are Dealing with State-by-State Marijuana Legalization
Kym MacKinnon

At the federal level, the status of marijuana is still illegal while at the state level, laws are being presented to change the consumption of marijuana to be legal. To share the numbers, more than half of US states including Columbia have legalized the consumption of medical marijuana as well as its recreational purposes.

Implications of this state-level legislation have been noticed in the form of growth in the marijuana industry resulting in the need for the insurance industry to back it. Being newly introduced changes, full effects of this legalization are still in the assessment process with insurers often finding themselves in difficult situations. This will not only have an impact on claims, lawsuits, and other related issues but also the sale and purchase of the material itself.

Liability accumulation model

The liability accumulation model helps in understanding the potential impacts in event of a liability claim where each claim can be treated in its own way concerning that particular scenario. Economic, legal, and regulatory changes can dramatically affect how liabilities will be perceived and honored. From the aspect of companies dealing in the supply chain of marijuana, a liability loss model will enable them to have insurance backup against life insurance for smokers. Historic data can also guide insurers in determining the potential claims and spread of losses. By looking at realistic past events, insurance providers are starting to analyze and quantify their risks with modification in their risk profiles to an acceptable level.

Overview of Marijuana’s effects

Although studies have shown that more research is needed to associate marijuana usage with injuries and other medical issues, a comprehensive list is as under with possible harmful impacts:


While less evidence is available in favor of marijuana causing lung, head, or neck cancers, studies have supported evidence for marijuana to cause testicular cancer.

Heart attack and diabetes

Limited evidence is available supporting the association of marijuana with these medical conditions.

Respiratory issues

Smoking cannabis on regular basis may cause increased episodes of respiratory issues like phlegm, chronic cough, and bronchitis.

Substance abuse

Moderate evidence is available linking usage of marijuana with abuse of drugs like alcohol, illicit drugs, and tobacco.

Investor’s perspective & Opportunities

With the probable success of the marijuana industry, its downsides are not ignorable as well. As per the meeting of the National Cannabis Industry Association (NCIA) held in February 2020, it was discussed that many companies are struggling in the industry financially. The industry was deemed to be facing vendor issues complaints from users, billing issues from suppliers, and investors being reluctant to pitch in their money. Companies were seen reporting less earning and losses in a few cases on account of hard and changing conditions despite putting in efforts of increased efficiency and cost-cutting measures.

Not going too much in the past, as of April 2020, the covid hit economic conditions were disastrous for some major companies. Two companies in the marijuana industry had to announce staff layoffs in huge numbers as a result of the increased challenges. Even smaller firms faced a similar issue and some had to raise cash from the financial institution to live for another day.

Insurance risk

To predict insurance risk to the most precision, will be a difficult job keeping in view the underlying and everchanging legal conditions. Underwriters around the industry need to examine products and terms to be offered to fully cater to this recently available and growing industry. Marijuana being recently legalized has not been on the desk of insurance providers as a covered product. Rather it is still restricted and excluded from the list of covered insurance products for most insurance companies. However, one cannot ignore the potential that this industry possesses and will surely be a major market for insurers across the globe.

If you see the historic data, like any new industry, restructuring is needed for this industry to reach its full potential and high turnover. Market experts around the globe expect this industry to be more competitive and outshone many industries, giving a tough time to the retail and manufacturing industry as a going concern.

Other concerns

Injury or death

Instances have been noted in the past where road accidents have resulted from intoxication and usage of marijuana so one cannot ignore the risk of injuries or even death directly linked with marijuana.

Accidents in a work environment

Even with the legalization of marijuana, states have ensured that provisions are included in statutes covering drug-free workplace policies so that on-job intoxication still remains prohibited.

Product contamination

Product contamination is another concern related to the legalization of marijuana. Experts have been concerned over contamination of this product with pesticides or other harmful chemicals for human health.

Child intoxication or under age usage

Consumption of underage children is one of the more debatable concerns presented against the legalization of marijuana. However, not enough evidence was quantified to put this case forward.

Final thoughts

Over the past few years, an increase in consumption, as well as the trade of marijuana, has been noticed among the states with more and more promotion of substance consumption after legal channels were cleared and opened. Previously, restricted programs were run by states, esp. restrictions imposed by the federal government where it is still illegal for usage even by adults.

One cannot turn a blind eye to concerns presented by market experts and humanitarians against the legalization of marijuana. However, with the state government allowing its legal certificate, more focus is being shifted towards the industry perspective including the economic potential as a booming market as well as implications concerning insurance. What’s needed at this stage is the detailed guidelines for this market as well as insurance companies to tackle these implications for this industry to reach its potential to the fullest.