By Greg Doherty10.07.19
Right now, CBD retailers face two big challenges: securing a credit card processor and the high cost of liability insurance. While I can’t help with the former, I can opine on the latter. This article will address this basic question: How should a company in the CBD/dietary supplement industry procure liability coverage, and be confident of proper limits of insurance, coverage, and a competitive premium?
Many people take the approach “the more brokers, the better,” believing that healthy competition will keep costs down. But purchasing liability insurance for a company in the CBD retail space is not the same as buying insurance for a family dry cleaner. There are many insurers anxious to underwrite a dry cleaner insurance business, but only a small handful of underwriters for the CBD business. And as I have written previously, some among this small handful offer dubious coverage limitations that will make you wonder what you are really getting when they hand you the policy.
Here’s an example. One underwriter of CBD insurance has an endorsement hidden deep in the policy, which you will never see—and the broker is also unaware of it—that eliminates all coverage if the CBD is found to have any THC in the product that produced the claim. We all know the legal maximum of 0.3% of THC in CBD products, but this goes much farther and says the product must have zero THC in it. Would you want your products subject to this exclusion, especially those of you that get your products from a white label supplier?
A capable and knowledgeable insurance broker is a valuable asset, one who can walk you through this minefield. So the broker selection process is important. By using a set of selection criteria, a good choice can almost be guaranteed.
But first know this: there’s a complication in selecting your CBD insurance broker that the vast majority of people are not aware of. The insurers offering product liability to the CBD industry require the use of a wholesale insurance broker to access them. So the broker you select (the “retail broker”) must submit your account to a wholesale broker, who in turn will submit it to viable insurance companies. Most people are under the impression that their retail broker is talking directly with the insurance underwriters. This is not the case. Thus, the introduction of yet another party to the buying chain makes the insurance procurement process more vulnerable to something important being overlooked, thus slowing down or possibly even stopping the process altogether.
Selecting the Right Retail Broker
With two brokers (wholesale and retail) now in evidence, it is even more important to select a competent and knowledgeable retail broker to coordinate the marketing process. The retail broker is the coordinator, responsible for directing the right information to his wholesale broker and executing a clear, planned marketing strategy on the client’s behalf.
Often, when a company follows the “more brokers the better” philosophy, two or more retail brokers engage two or more wholesale brokers, who all go to the same handful of CBD insurers. Underwriters will often not spend the time and effort to quote an account when they realize multiple companies are bidding against them, which is confirmed when they receive an account from two or more wholesale brokers.
Selecting a single retail broker with expertise in the CBD space to represent your company to a single wholesale broker and all insurers, magnifies the probability of a successful outcome of the quotation process, including not only the right coverage, but also the most competitive premium for that coverage.
There are certain characteristics you should look for when selecting a retail broker for your CBD business. Has he published articles on the subject? Have you seen him at trade shows and/or CBD industry conferences, either as an attendee or speaker? Does he exhibit a real commitment to the CBD industry? Can he quickly advise on which insurers are currently offering CBD insurance, and tell you about their “minimum premiums” which apply to smaller start-ups? Can he accommodate other insurance products your company will inevitably need, such as insurance on your warehoused inventory, or workers’ compensation?
Selection of an insurance broker is a task that must be exercised carefully and will take some time. Jumping on the Internet and filling out random insurance applications, without speaking to a broker who holds himself out as qualified, is not the way to secure insurance for your CBD business. If the selection of your CBD broker is made with some of these considerations in mind, the result should be that you will be able to sleep much better at night, knowing your CBD business is properly protected and insulated from frivolous lawsuits.
Greg Doherty
Greg Doherty is an independent commercial insurance broker and consultant to the CBD and dietary supplement industries. He consults for all-natural health sectors, including but not limited to contract manufacturers, raw materials suppliers, testing labs, distributors, and retailers. Doherty is a recognized authority on dietary supplement liability insurance. He has almost five decades of experience as a broker, focusing on the nutraceutical industry for 17 years. More recently, he has quickly become one of the leading insurance advisors to the CBD industry. His website is www.gregdoherty.net. Phone 626-840-0270.
Many people take the approach “the more brokers, the better,” believing that healthy competition will keep costs down. But purchasing liability insurance for a company in the CBD retail space is not the same as buying insurance for a family dry cleaner. There are many insurers anxious to underwrite a dry cleaner insurance business, but only a small handful of underwriters for the CBD business. And as I have written previously, some among this small handful offer dubious coverage limitations that will make you wonder what you are really getting when they hand you the policy.
Here’s an example. One underwriter of CBD insurance has an endorsement hidden deep in the policy, which you will never see—and the broker is also unaware of it—that eliminates all coverage if the CBD is found to have any THC in the product that produced the claim. We all know the legal maximum of 0.3% of THC in CBD products, but this goes much farther and says the product must have zero THC in it. Would you want your products subject to this exclusion, especially those of you that get your products from a white label supplier?
A capable and knowledgeable insurance broker is a valuable asset, one who can walk you through this minefield. So the broker selection process is important. By using a set of selection criteria, a good choice can almost be guaranteed.
But first know this: there’s a complication in selecting your CBD insurance broker that the vast majority of people are not aware of. The insurers offering product liability to the CBD industry require the use of a wholesale insurance broker to access them. So the broker you select (the “retail broker”) must submit your account to a wholesale broker, who in turn will submit it to viable insurance companies. Most people are under the impression that their retail broker is talking directly with the insurance underwriters. This is not the case. Thus, the introduction of yet another party to the buying chain makes the insurance procurement process more vulnerable to something important being overlooked, thus slowing down or possibly even stopping the process altogether.
Selecting the Right Retail Broker
With two brokers (wholesale and retail) now in evidence, it is even more important to select a competent and knowledgeable retail broker to coordinate the marketing process. The retail broker is the coordinator, responsible for directing the right information to his wholesale broker and executing a clear, planned marketing strategy on the client’s behalf.
Often, when a company follows the “more brokers the better” philosophy, two or more retail brokers engage two or more wholesale brokers, who all go to the same handful of CBD insurers. Underwriters will often not spend the time and effort to quote an account when they realize multiple companies are bidding against them, which is confirmed when they receive an account from two or more wholesale brokers.
Selecting a single retail broker with expertise in the CBD space to represent your company to a single wholesale broker and all insurers, magnifies the probability of a successful outcome of the quotation process, including not only the right coverage, but also the most competitive premium for that coverage.
There are certain characteristics you should look for when selecting a retail broker for your CBD business. Has he published articles on the subject? Have you seen him at trade shows and/or CBD industry conferences, either as an attendee or speaker? Does he exhibit a real commitment to the CBD industry? Can he quickly advise on which insurers are currently offering CBD insurance, and tell you about their “minimum premiums” which apply to smaller start-ups? Can he accommodate other insurance products your company will inevitably need, such as insurance on your warehoused inventory, or workers’ compensation?
Selection of an insurance broker is a task that must be exercised carefully and will take some time. Jumping on the Internet and filling out random insurance applications, without speaking to a broker who holds himself out as qualified, is not the way to secure insurance for your CBD business. If the selection of your CBD broker is made with some of these considerations in mind, the result should be that you will be able to sleep much better at night, knowing your CBD business is properly protected and insulated from frivolous lawsuits.
Greg Doherty
Greg Doherty is an independent commercial insurance broker and consultant to the CBD and dietary supplement industries. He consults for all-natural health sectors, including but not limited to contract manufacturers, raw materials suppliers, testing labs, distributors, and retailers. Doherty is a recognized authority on dietary supplement liability insurance. He has almost five decades of experience as a broker, focusing on the nutraceutical industry for 17 years. More recently, he has quickly become one of the leading insurance advisors to the CBD industry. His website is www.gregdoherty.net. Phone 626-840-0270.
