Why Is Cannabis Insurance So Expensive in NY?

The Core Reason: Limited Insurance Carriers

Cannabis is still federally illegal under Schedule I of the Controlled Substances Act. Because of that, many major insurance carriers will not write cannabis policies.

In New York, most dispensary insurance is written through surplus lines carriers, not standard admitted carriers.

That means:

• Fewer companies compete for your business
• Less price competition
• Higher premiums

Limited supply drives higher cost.

What Is Surplus Lines Insurance?

Surplus lines insurance is coverage provided by non-admitted carriers that insure higher-risk industries.

It is legal.
It is common in cannabis.
But it typically costs more.

Surplus lines carriers:

• Do not have to file rates the same way admitted carriers do
• Price risk more conservatively
• Charge higher base premiums

This structure alone increases cost.

Cannabis Is Viewed as High Risk

Insurers price based on risk exposure. Cannabis retail carries multiple layers of perceived risk:

• Cash-heavy operations
• Theft and robbery exposure
• Product liability risk
• Regulatory shutdown risk
• Federal illegality risk
• Limited loss history data

When insurers cannot predict loss frequency accurately, they price conservatively.

Limited Loss Data

Cannabis is a relatively new legal industry in New York. Insurers do not have decades of claim history to model pricing.

Without stable actuarial data, carriers increase premiums to offset uncertainty.

Over time, if claims stabilize, pricing may normalize. But the industry is still young.

High Product Liability Exposure

Even if you do not manufacture products, you can be named in a lawsuit.

Dispensaries may face claims involving:

• Contaminated product
• Labeling disputes
• Consumer reactions
• Product recalls

Carriers assume that anyone in the distribution chain may be sued. That risk is priced into your premium.

Federal Illegality and Banking Risk

Because cannabis remains federally illegal:

• Banking access is limited
• Financial transparency varies
• Some insurers fear federal enforcement shifts

Even if enforcement is unlikely, uncertainty increases underwriting caution.

Uncertainty equals higher premiums.

Security and Cash Exposure

Dispensaries are perceived as:

• Cash-intensive
• High-theft targets
• Attractive for organized retail crime

Even if your store is well secured, industry-wide perception affects pricing.

Coverage Requirements in NY

Many dispensaries are required by:

• Landlords
• Investors
• Lenders
• OCM license conditions

to carry multiple policies, including:

• General liability
• Product liability
• Workers’ compensation
• Property coverage
• Umbrella coverage

The combination of policies increases total cost.

What Drives Your Individual Premium

Premiums are influenced by:

• Gross revenue
• Location (NYC vs upstate)
• Security systems
• Claims history
• Inventory value
• Hours of operation
• Deductible levels

Two dispensaries in the same city can pay very different premiums depending on structure.

Can Premiums Go Down?

Possibly, if:

• You demonstrate strong compliance history
• You reduce claims
• The market gains more carriers
• Federal reform reduces perceived risk

Until then, cannabis remains priced as a specialty risk industry.

What You Should Review Before Binding Coverage

Before signing your policy:

1. Confirm coverage limits
2. Review exclusions carefully
3. Confirm product liability is included
4. Confirm theft limits match inventory value
5. Verify compliance with lease requirements

Cheap coverage that excludes key risks creates larger exposure.

Bottom Line

Cannabis insurance in New York is expensive because the carrier pool is small, most policies are written through surplus lines markets, federal illegality increases perceived risk, and the industry lacks long-term loss history.

It is not arbitrary. It is structural.

Related Pages

• Do NY Dispensaries Need Product Liability Insurance?
• Why Cannabis Insurance Claims Get Denied
• What Is a Certificate of Insurance (COI)?
• What Is a Vendor Indemnification Clause?

Source Material

• New York Insurance Law § 1101 (definition of doing an insurance business; admitted vs. non-admitted framework).
• New York Insurance Law § 2105 (surplus lines broker requirements).
• New York State Department of Financial Services (DFS), guidance on excess and surplus lines insurance.
• National Association of Insurance Commissioners (NAIC), Cannabis Insurance Regulatory Guide (explains market structure and E&S reliance).
• Controlled Substances Act, 21 U.S.C. § 812 (Schedule I classification of cannabis at the federal level).

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