Cannabis Companies Struggle with Soaring Insurance Costs in 2025

The cannabis sector is moderating in 2025, with sales up but product prices
down 10 percent, according to Hub International’s *2025 Cannabis Outlook*
Executive Survey. That’s a demanding scenario for industry businesses,
which often struggle to find the right insurance. The Hub report notes
about 75 percent of industry respondents stated their organizations “don’t
have adequate insurance to protect against risks that will harm profits.
Companies are often left with a choice between unaffordable rates and no
protection.”

Cost remains a big issue, too. A “tight market” for commercial auto
insurance means premiums for product transportation within the industry
have tripled. “Rising costs and low capacity have made it challenging for
cannabis businesses to secure appropriate coverage,” the report noted.

It’s not only higher insurance prices and lower sales revenues that are
vexing operators this year. Among the other issues also weighing on company
decision-makers is the lack of adequate coverage due to a paucity of
insurance providers.

“The current state of cannabis business insurance is quite restricted, with
limited insurers willing to participate due to the high-risk perception and
regulatory complexities,” said John Crist, founder of Prestizia Insurance
in Dallas.

Cultivators and retail stores, in particular, often struggle with obtaining adequate
coverage. That’s partly by design, as insurers weigh the risks of offering
coverage in a relatively young marketplace.

“Best practices for these businesses include maintaining stringent
compliance with state regulations and demonstrating a thorough
risk-management strategy,” Crist said. “For instance, a cannabis retail
client in New York had to implement extensive security and
inventory-tracking systems to meet insurance requirements, which
underscored the meticulous level of compliance needed.”

Without a doubt, insurers need to do a better job of understanding what
cannabis companies need. Insurers must do their homework and figure out
what makes firms tick to craft the correct coverage. That’s especially the
case at the customer-facing agent level.

“One of the biggest challenges for new agents is the ability to learn and
understand the business and marketplace,” said C.L. Mike Schmidt, an
attorney with Schmidt & Clark LLP in Santa Fe, New Mexico. “There are a lot
of ins and outs that an agent should attempt to learn so they’re
well-equipped to serve their clients. When it comes to underwriting the
risk, agents must comprehend that the majority of policies are written on
proprietary endorsements, so knowing the ins and outs of each carrier’s
form is critical.”

Cannabis businesses need to protect themselves, too. Sector companies are
going to have to dig deep, especially in key areas like risk-management and
organizational resilience, in an environment where many companies are a
single weather disaster, supply chain, or data fraud incident away from
significant financial damage.

“Organizations that focus on organizational resiliency efforts will be
poised for success through the implementation of a robust business
continuity plan that can pressure-test these potential loss scenarios,” the
Hub outlook report noted. “An insurance advisor with cannabis industry
expertise can help educate both the buyer and the seller on best practices,
making sure businesses secure proper runoff or [directors and officers]
policies to protect the bottom line.”

Companies have faced myriad challenges getting insured and will need to
show patience as the insurance industry resets in a volatile year.

“The cannabis insurance market is characterized by a hardening trend,
meaning premiums are rising while insurers are implementing stricter
underwriting requirements,” noted CoverCannabis’s 2025 Cannabis Insurance
Outlook report. “Factors driving this trend include heightened regulatory
scrutiny, an increase in product liability claims, and risks associated
with emerging consumption methods. This environment makes it harder for
businesses to access affordable and comprehensive insurance coverage.”
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[image: iQ analyst Brian O'Connell headshot]

*In his role as analyst for InsuranceQuotes, Brian O’Connell studies the
insurance industry and provides tips, advice, and insights. A former Wall
Street trader, he is the author of the books *CNBC’s Creating Wealth* and *The
Career Survival Guide*. His commentary regularly appears on major media
platforms like Fox Business, U.S. News, The Motley Fool, and TheStreet.*