Insurance Risk Interview

In this module’s second Expert Insight interview, Summer Jenkins continues with a discussion of ways that risk in the cannabis industry can be effectively mitigated. As you are listening, consider which techniques could be considered high-cost or labor-intensive and which could be implemented with little additional overhead. Click the play button below to listen to the interview with Summer TRANSCRIPT Paul Coble: Welcome back everyone. We are back with summer Jenkins, Senior Product Development Manager at canister insurance services. Welcome back summer. Summer Jenkins: Thank you so much. Paul Coble: And we're going to talk this week about ways that business operators can spot and reduce their risk in the cannabis industry so. Last week we spoke a lot about some of the insurable risks that exist in the cannabis industry. What are for starters, what are some ways that business operators can spot those risks within their own operations. Summer Jenkins: Great question, call. So I do want to clarify what we what we mean when we say risk so risk would be an exposure to financial and monetary loss. Now you can suffer when a loss because of, you know, physical damage to your property, but you can also suffer loss because of damage to your employee capital. So to spot a risk or business, you have to really think holistically and consider. How could my product be harmed and. How could my people be harmed. So, you know, we recommend using organizations like information that's published by organizations like OSHA, which is you know federally available. And is also available by state and so organizations like Cal Osha and even our insurance carrier or risk manager insurance agent. All of those organizations catalog information. They also catalog things that tell you the types of injuries that employees sustained. So the first place that I would always recommend starting is to, you know, educate yourself as a business owner and then out educate your employees. So the employee or I guess the organizational morale organizational spirit trickles down to all of the employees and the organization as a whole. So an organization that is committed to education and safety is one that's always going to be able and to be able to readily identify risk to the business and to your most valued assets which would be your employees. Paul Coble: And so from the insurance and insurance companies perspective, what are some of the, you know, questions that insurance companies might ask a business to help identify some of those risk points? Summer Jenkins: We typically start with an insurance application and in cannabis industry, the applications can be very long, and appear daunting, but that is because the nature of the business requires us to collect a lot of information. So the basics. I always referred to as the who, what, when, where, why, and how. So who is the business owner, you know, what is it that the business provides. Are they a service provider, are they, you know, providing a particular product. What are they doing? And so how, you know, and then how. So how are they, they, if they are a manufacturer? How are they creating this product? You know what type of facilities. Do they have what type of equipment, are they using. So we really want to have a really good understanding of the who, what, when, where, hows and whys and then the second piece outside from the operational data. Would be, you know, who are the, who are the management, you know, do they have a commitment to safety. Do they have experience previous related experience for the industry? We typically like to see someone who didn't just come from, you know, only a shoe shop to deciding that they want to manufacturer you know cannabis oils using volatile chemicals and solvents. So the more information that we have about the actual business and it's in its founders. The, the better from an instability standpoint and also from a pricing standpoint. Paul Coble: Do you have any like baseline, or more advanced requirements that specifically cannabis companies have to undertake in order to be insurable. Summer Jenkins: That's a great question, Paul. Yes, yes. So most of our, our requirements mirror what's required in the long so I can talk about California specifically California requires that a retail shop have separate secure access areas where they store their money where they store their product. They also get very detailed with the type of security requirements that the organizations have. So, even down to the security cameras need to record in HD. I think it's 180 180 I and II know better than I do about the 9% but I know it's like 740 that's considered minimum or you know, minimal or better, and then 1080 is the best. So the, the law says that the business owner has to have high definition cameras and that record the goings on of the business. And also, who's coming in and out and then they also say that any dispensary. The only executives and the owners of the business can access the area where money is held and then also. The law also says that the organization has to have a safer vault on the premises, so the insurance requirements typically mirror what is in the law, but I know in the creation of some of the programs that I created. I looked at what the legal requirements were not just from the State of California, but also what the requirements were for other similar industries that transport. High value commodities and that also store top secret data or, you know, highly sensitive bits of information to kind of glean what types of requirements or what types of safety practices are employed by other similar industries. Paul Coble: Interesting. So out of curiosity, really are in compliance with some of those requirements, especially the ones that are above and beyond state regulations that might not have, you know, regulatory oversight or someone with regulatory oversight are is compliance with those requirements self-reported. Are there some sort of audits that insurance companies might conduct on the physical premises or are there, you know, some sort of third party security or technical audits that cannabis companies might, you know, hire out to, to be sure that they're complying with all of these requirements? Summer Jenkins: Yes, yes. So definitely the insurance carriers do conduct what's called an inspection. So typically when we use the term audit that means we're looking at financial data to kind of true up the estimated premium rating basis. Which would be, you know, payroll gross receipts that sort of thing. But from a compliance standpoint, we do conduct inspections, so generally within the first 90 days to the first year of the policy being, in fact, we would send a third party auditor down to the site to take a look at the construction type, you know, the building take measurements take pictures you know the safe room secure access control points. Any inventory storage area fire sprinklers fire suppression systems and then because the cannabis industry is unique and a lot of ways when compared to other types of manufacturing the cannabis industry is one that uses different methods for extractions of flour and we differentiate between the two by referring to them as volatile or non-volatile extractions. So if an organization is doing extractions using a volatile extraction method we do like to see that their extraction equipment is what's called closed loop. As opposed to open loop. So an open loop manufacturing system, but allow vapors gases and things to seep out into the environment, which obviously. These things are flammable. So that's not as desirable as a closed loop system would be so those are the types of things that we look at. During the inspection. And then we also like to see that there and it used to be called in the MDS postings. You know, so the material DATA SAFETY. I know they changed the acronym. Now, but it's still the same thing. So you know, anytime that there is a chemical on site. Those things need to be posted as accordance with the law. And the data that indicates that the components or collection systems or storing systems are that they're safe. So those are the kind of things that that we look for. So it's a general operational and safety type inspection. Paul Coble: Excellent. So is there anything unique or uniquely challenging about risk mitigation in the cannabis industry. Summer Jenkins: You know, Paul. There's so many things that are that pose unique challenges to this industry that the first thing. This is a multi-billion dollar industry that's still in its infancy. So, and then the second things are always changing. And those two those two factors make for some unique challenges and also unique opportunities. So with anything in its infancy, you know, there are growing pains. Lessons learned, you know, the bait prices. A few years back, was a huge thing that a huge, huge hardship and challenge for the industry and, you know, there were a few companies that were involved in some of those claims and evaluating the validity of the claims that were involved. And then also finding out if they were contributing factors was huge, a huge challenge for everyone. So, you know, during that time. Organizations had to really consider what types of products they were using when they're making these bait cartridges and pens. And then the insurance industry and response had to, you know, look at are we going to continue to ensure these types of operations when we hadn't really drilled down to the exact cause of people's illnesses. And you know the laws pose a huge challenge. So with prop 65 and some of the other you know monumental legislative actions that allowed for cannabis and cannabis to be sold legally. They also agreed to allow each municipality to have their own control. So, not only at the state level but at the city level at the county level. So you have all of these different governing bodies. Making their laws and imposing different requirements on the business owner and you know, the smallest bit of legislation could make for huge changes. So, you know, right now we're waiting to see what happens with the more act. You know, and it's not expected to make it through, through the Senate, but if it does, then again you know everyone's laws are going to have to change. And, you know, we all know that. You know, legislators and government entities and organizations are not always the most expeditious with making changes and not always the most expedient. Instead of communicating changes to those who are affected by them. So, those, those things pose some pretty significant challenges for business operation operators. Paul Coble: Well, summer, whether you know it or not. That is a perfect preview to our fourth module next week. So I'm going to wrap it up here and say thank you for educating us so much on insurance in general and insurance risk in the cannabis industry. I really appreciate it. Summer Jenkins Senior Product Development Manager at canister insurance services. And I should mention, you're also vice chair of the NCI at risk management and insurance committee. Summer Jenkins: Correct. I am, I am. Yes. Paul Coble: And so if anyone listening. If any students need to get in touch with you to talk cannabis insurance or looking for cannabis insurance for their own business. How can they get in touch with you? Summer Jenkins: Sure, so they can definitely reach out to me on LinkedIn. You know I can. I'm pretty easy, easily accessible and I'm always happy to help. So LinkedIn as summer Jenkins. And then you can also send me an email. So Jenkins at can assure.com and also you can find me in various podcasts and Educational Videos seminars and things. I also am very active in the cannabis social equity space to volunteering and just doing whatever I can to support the industry. So if anyone is interested in joining the same please definitely feel free to contact me. Paul Coble: Wonderful. Thanks again, summer, and we'll catch up with everyone next week when we start talking state regulations. Bye. Summer Jenkins: Thanks You may use this discussion board to discuss issues that were brought up in the recording. To get the conversation started, consider the following: Identify 3 risk mitigation strategies or techniques discussed in the interview. For each risk mitigation strategy, identify what values could be adversely affected by the strategy.