Cannabis will be legal soon. How ready is the insurance industry?

By: Vin Heney on August 23, 2018

The date is set — October 17, 2018.

Canada is officially less than two months away from legalized recreational cannabis use. It’s a societal shift that has left many industries scrambling to figure out how to position themselves in this brave new world. How will school curriculums introduce education around responsible consumption? How will restaurants incorporate edibles into their menus? What will legalization mean for tourism? How will cannabis products be marketed to the public?

One industry in particular has been paying close attention to legalized cannabis since it was first announced — insurance.

We turned to the experts to see if Canada’s insurance industry is ready for what’s coming down the pipe.

Auto Insurance

One of the biggest challenges with legalized cannabis and auto insurance remains how to enforce the new ‘drugged-driving’ rules. The Canadian Association of Chiefs of Police says they will have less than half of the number of required officers trained to spot impairment by the legalization date.

"While it is unlikely that we will attain our target number of 2,000 Drug Recognition Experts by October 17th, we are confident in our present processes, knowing that they will continually improve with time as we build capacity," says Natalie Wright, a spokeswoman for the chiefs of police.

It’s estimated that at the current rate of training, it will take more than five years before 2,000 officers are trained.

Once legalized, will stoned driving have the same impact on insurance premiums as drunk driving? Depending on how many nanograms of THC you have in your blood — five or more and it’s a criminal offence — you could be facing fines, jail time, and all of the insurance-related consequences that come with DUI convictions.

Home Insurance

As reported previously, federal regulations introduced in 2016 state that medical cannabis users who are registered with Health Canada are permitted to grow a limited amount of cannabis for personal use.

However, just because tenants are legally entitled to grow their own cannabis does not mean insurance companies view the activity as low-risk. In a 2017 case from Kamloops, B.C., Gore Mutual Insurance cancelled a home insurance policy after being made aware of a tenant’s legal grow-op.

The insurance company, in a statement to Go Public, says it "does not provide coverage for marijuana grow-operations regardless of their legality because this type of operation in a residential building presents inherent insurance risks, [which include] a greater likelihood of water damage, mould, fire, vandalism and burglary."

So will the reluctance to insure homes containing grow-ops ease once legalization comes into effect? It remains to be seen, but based on the risks inherent with in-home, amateur grow-ops, it seems likely that insurers will remain cautious in their approach.

Life Insurance

Unlike some of the other sectors, life insurance isn’t waiting for legalization to make changes. Beginning with Sun Life in 2016, many of the big life insurance providers have updated their underwriting to remove recreational cannabis use from the high-risk activity category, where it previously resided alongside tobacco use.

"They saw the writing on the wall in terms of legislation," insurance broker Lorne Marr says of the life insurance industry's changing position.

"A lot of the guidelines are still a little bit ambiguous, but it's a big change from five or 10 years ago because everybody was getting smoker rates, which is a huge difference in the premiums."

While cannabis use is still being closely monitored — consumption while driving is still considered high-risk, consumption with a history of depression raises red flags — its recategorization as a low-risk activity is already having an impact on the premiums of regular users.

Health Insurance

As of March 1, 2018, sponsors of Sun Life Financial Inc. group benefits plans were given the option to add medical marijuana as part of their treatment program and pain management program. This move by Sun Life Financial Inc. — which provides health benefits to more than three million Canadians — represents a major step towards cannabis acceptance by the health insurance sector.  

“Although there may not be immediate benefit for patients as specific plan sponsors will need to purchase the coverage, this move will make covering medical cannabis simpler than today’s exception process and speaks volumes to the broader acceptance and legitimacy of medical cannabis,” says Jonathan Zaid, executive director of Canadians for Fair Access to Medical Marijuana.

While the widespread adoption of cannabis as part of health insurance packages is still far off, look for other major insurers to follow the lead of Sun Life Financial Inc.

Travel Insurance

Travel insurance pertains mainly to emergency health situations while abroad, so there’s relatively little crossover with the legalization of cannabis use in Canada.

The most important thing to remember when it comes to international travel is that recreational cannabis use remains illegal in most countries, so crossing borders with the substance, and even admitting to past use, is strongly cautioned against. Either could result in denied entry or serious criminal penalties.