The Green Rush – How Marijuana Mixes with Insurance


Is marijuana legal in Canada?

Not quite – marijuana is currently accessible only to those who need it for medical purposes, with permission from a healthcare practitioner.

But with the election of the Liberal government in 2015, it appears that Canada is steadily moving towards its legalization for recreational use.

What will this look like? If marijuana is approved for use by a much bigger consumer base and for new purposes, who will be allowed to grow it, sell it and distribute it? Moreover, what are the logistics of managing such a business?

This is where the Insurance industry comes in.

As with any business, the “green” rush will require a considerable effort on behalf of Insurance professionals to anticipate, assess and cover the risks involved. To try and create a picture of what legalization will look like in Canada, we’ve mapped out the current situation in Insurance and the steps that will need to be taken to make weed into a fully legal, consumer product.

Weed, Right Now

Despite marijuana being technically illegal under the Controlled Drugs and Substances Act (CDSA), it’s already causing quite a storm in the Insurance industry.

The present landscape of marijuana is limited to three main stakeholders – the registered users, who are prescribed it for their medical needs, the government, who structures and oversees this process and Licensed Producers, commercial entities who since 2013 are able to grow and ship marijuana to registered users for profit.

Even though it seems that there aren’t a lot of parties involved relative to, let’s say, alcohol – there is already a lot of heat around who is allowed to grow marijuana and how.

Why is this? Take the situation surrounding registered users who grow their own marijuana. Under the current law, they are able to grow their own marijuana or have someone grow it for them.

But this doesn’t mean they are legally required to disclose it to their landlord, whose property might be facing a lot of damage due to fire, mould or break-in theft from a marijuana grow-op.

If renters aren’t legally required to disclose whether or not they will be growing marijuana in the property, how can landlords ensure that their insurance will be able to cover the costs?

Another hot button topic is the question of who will cover the insurance of Licensed Producers (“LP”). As this is a new industry, it can be tricky to assess the risks and needs of LPs who have only existed for three years or less in Canada. Furthermore, if an Insurance company decides to cover a LP before marijuana becomes fully legal – will this reflect badly on them in the eyes of the public? There’s still a certain stigma surrounding the marijuana industry, so some Insurance companies are reluctant to insure LPs because it has the potential to negatively affect their reputation.

As of today, these dilemmas have yet to be resolved and Insurance industry is working hard to come up with the right solutions to these very real problems.

But they’re only the beginning compared to what issues will arise when marijuana becomes fully legal.

Legalizing Marijuana – A Realistic Look

In April 2016, Health Minister Jane Philpott announced to the UN General Assembly that Canada will move towards legalizing marijuana in the spring of 2017. When this happens, Insurance companies are likely to see several changes in risk, particularly in the areas of personal, commercial and property insurance.

Legalization will impact personal insurance policies because marijuana has the potential to be a drug that is openly grown in people’s houses or used while driving. This means that Insurance companies may need to create new policies to support those who want to stay protected while growing marijuana in their personal home as well as users who could be involved in accidents where it’s suspected that they were driving while “high”. For example, if a driver is caught being “high” but the amount found in their body is under a certain legal limit – they would theoretically be able to cover the costs of the accident through their insurance policy. However, how much marijuana will be allowed to be grown in homes and what the legal limit and method of measuring marijuana use will be major questions that need answers.

In terms of commercial insurance, legalization is likely to expand the current policies held by Licensed Producers, who, due to being highly regulated by Health Canada, will be welcome clients for Insurance companies. As more businesses enter the marijuana market, Insurance companies will be ready to provide a wider variety of policies to cover the needs of different types of LPs, such as a small dispensary run by 20 people versus a multi-billion dollar corporation. It’s quite exciting therefore, to assess the risks for commercial ventures who want to become Licensed Producers because they’re expected to be highly profitable and well-run businesses.

There is also optimism that the legalization of weed will allow Insurance companies to openly provide home insurance to people who choose to grow it in their own homes without backlash from the public. This will make it much safer for those with grow-ops to ensure that they are protected from dangers like fire, water damage, mould and theft due to the growth of weed in their homes. It is still unclear though, whether renters will have to disclose their use of a space to grow marijuana to landlords – if this happens, it will give landlords the ability to safeguard against the financial losses incurred due to a legal grow-op being carried out on their property with the right Insurance policies.

While legalization is an exciting prospect for people interested in marijuana for recreational use, it’s an even bigger opportunity for professionals in the Insurance industry to pioneer, with government and other stakeholders, new guidelines for society to regulate, consume and commercialize the drug. For forward-thinkers looking to expand their horizons, the Insurance industry, especially in a day and age where the legalization of weed in Canada is close at hand, is an extraordinary and challenging place to be.

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