Passage of the Farm Bill has had a positive effect on availability and premium cost.
Since my last column on this subject (December 2018), things have changed (for the better), if you are a seller of CBD products. The term “seller” here is all-inclusive; it encompasses those processing hemp into CBD and selling it as a raw material, those using it to manufacture finished products (where CBD is the only ingredient or a component part of a finished product), and those selling CBD products under their own brand name supplied by other entities.
Let’s review. Just a few short months ago there were basically four liability insurers who would quote CBD risks, and as I wrote previously, only one of those in my opinion was a truly viable insurer. By “viable” I mean that this carrier would take your money and give you a policy with some real coverage—unlike the others, which have terms and conditions buried deep in their policies that make coverage questionable. And when would you find this out? At the worst possible time—after a claim is made against you.
Fast forward to today. Now the number of viable carriers has tripled to three. The passage of the Farm Bill had a positive psychological effect on the management of these two new carriers. Although we all know that CBD is still mired in some regulatory issues, it was enough to sway these insurers to open the door to insuring CBD.
And of course that’s a good thing for purveyors of CBD products. As the TV commercial says about getting a home loan, “when banks compete, you win.” The same is true now with viable carriers competing for your business.
Who are these three insurance companies? Not surprisingly, they are insurers that have been insuring dietary supplements for a very long time. So they are used to providing product liability insurance to ingestible, sometimes controversial products.
Price-wise, CBD product liability insurance is still generally more expensive than other dietary ingredients and supplements. This is probably due to the fact that the availability of CBD insurance is still relatively thin; on a given day there are about a dozen insurers for dietary supplements. Tellingly, Lloyds of London, which will readily insure supplements through several facilities in the U.S., will not insure CBD right now, with a few exceptions here and there, usually when CBD is a miniscule portion of overall sales.
Premium Cost for CBD Insurance
This is a tough one to put a bow on. While I can tell you with some degree of accuracy how much your dietary supplement premium might be, it’s much tougher for CBD right now. Like most other things surrounding the subject of CBD, premiums are only marginally predictable, because these carriers that are offering coverage are still finding their way on how to price their insurance. There’s little doubt this will change over time and premiums will become more predictable.
So how does a company go about the search for CBD product liability insurance, and be confident that it’s getting a fair market price and the proper coverage? Do you jump on the Internet and start calling folks all over the country to get prices and opinions? That’s not a particularly good idea, although I do understand that instinct; most people would think that’s a logical way to go about it. It might be a good way to procure pencils or shop for a new car, but not insurance.
It’s important to find a knowledgeable insurance broker to help you with this process. He or she can be a valuable asset to your company. Right now, the landscape for CBD insurance is in flux, and a knowledgeable broker will be able to impart the current pros and cons of the insurers purportedly offering this coverage. (Remember, there are some bad actors out there.)
And please also remember this: the lowest price is not the only parameter by which you should judge a CBD insurance quote. When the claim comes in, you’ll only be focusing on the coverage you bought, not the price. A competent and knowledgeable insurance broker will help you sort through the coverage issues before you purchase a policy.
I expect the landscape for CBD product liability insurance will be different six months from now. So stay tuned.