6 Questions About Cannabis Insurance with IMA’s Michael Hennessey

Michael Hennessey talks about joining IMA, the growing cannabis industry and what that means for the commercial insurance industry. 
By: | October 19, 2020

It is no secret that cannabis use is on the rise across the United States. In recent years, the perception of cannabis consumption has shifted from being taboo to becoming more accepted.

A recent survey done by Pew Research found that 67% of Americans support the legalization of the substance. Fourteen states have legalized cannabis in its entirety, with more than half of states have legalized it for medical purposes.

Cowen analyst Vivien Azer predicts that the industry’s revenue will reach $85 billion by the year 2030. But the cannabis business is facing a pressing issue: finding insurance coverage.

The National Association of Insurance Commissioners (NAIC) wrote in a study conducted by New Dawn Risk that “there are currently only six insurers offering cannabis coverage.”

Risk & Insurance® spoke with vice president and newly appointed cannabis national practice leader, to learn more about the implications the growth in the cannabis industry could have for the commercial insurance business, and his reasons for joining the IMA team.

Risk & Insurance: What was it about the culture at IMA attracted you?

Michael Hennessey, vice president, cannabis national practice leader, IMA, Inc.

Michael Hennessey: I was very drawn to IMA due to its ownership structure — independent and 100-percent employee-owned.

Because of this, its culture is that of a group of very high-caliber professionals really working together to do what’s right for the company, what’s right for clients and what’s right for the community.

It also allows us to innovate more, which, in my field, is critical to maintaining our expert position.

Why do you find the cannabis space intriguing?

There’s never a boring day.

The cannabis industry is a space with a significant need for quality services. It’s still in its infancy, and I greatly appreciate being able to partner with owners and operators to help support their businesses and normalize an industry that’s always been treated differently.

Help us understand the range of insurance and risk management products IMA is offering or plans to offer to the cannabis industry.

Clients in the cannabis industry have traditionally been ignored or even avoided by insurance providers.

Client advocacy is a big part of what we do, so we are looking ahead for these unique clients, and brokering insurance that manages risks the insurance industry has not seen before.

Particular to IMA, expanding our cannabis practice opens up our wide offering of products to our cannabis practice clients, who may have had limited options in the past.

What’s the biggest challenge underwriters face when trying to price risk in this space?

The biggest challenge is lack of actuary data.

Many of these products and businesses have never had insurance.

Underwriters are trying to make educated guesses rather than underwriting based on actuary data and/or loss history.

What aspects of the cannabis industry pose the biggest risks?

Lack of support and instability at the federal level.

Because the product has medical properties, we believe that, until the FDA steps in with scientific research, industry growth will be limited.

How optimistic are you that you can contribute to significant growth in this space, and why?

With clients’ best interests top of mind, we strive to drive premium and rates down.

In that case of growth opportunity in this space, I could not be more bullish on the potential of IMA’s cannabis practice. Over the past four years, I have immersed myself in the industry to understand how insurance can best support all facets.

As owners and operators know, a year in the cannabis industry is comparable to dog years.

We gain credibility through expertise and transparency, then setting and meeting expectations. The potential is likely greater than any of us could imagine. &

Emma Brenner is a staff writer with Risk & Insurance. She can be reached at [email protected].

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