Financial Literacy

Life insurance companies are trying to figure out cannabis edibles

By: Jessica Mach on July 1, 2019

Canadian retailers could start selling cannabis-infused foods, drinks and topicals as early as mid-December, putting the pressure on life insurance companies to fine-tune their approach towards cannabis users in the meantime.

The task is a big one for insurance companies, which need to decide how to assess the risk of a substance that they still don’t know the long-term impact of.

Previously, many life insurers had treated cannabis users like cigarette smokers, who pay about two or three times more in premiums than non-smokers with standard policies. But when Canada began legalizing cannabis for recreational use, insurers have increasingly started to take a different approach altogether for cannabis users — provided there is no tobacco or nicotine in the products they use. This is partly because some in the insurance industry believe that cannabis use is less risky than smoking cigarettes.

Many insurers now set a limit for how much cannabis their customers can use before they have to pay higher premiums. On average, that limit ranges from two to four times a week — and it usually doesn’t matter what form the cannabis comes in.

“More than four, then you would still be treated as a non-smoker with most companies, but there would be an extra rating or extra premium attached to that marijuana use,” Lorne Marr, LSM Insurance’s director of new business development, told the Globe and Mail last week. “And most companies treat the edibles as similar to smoking.”

But other insurers are more careful to make too many rules before they have more data on how cannabis impacts health.

Take the Canadian Life and Health Insurance Association, for instance. A spokesperson from the organization said that while its members will take recreational and medical cannabis use into account while assessing risk, they are still “continuing to assess the risks of any form of cannabis and will make adjustments to the risk profile as cannabis becomes more prominent in the market and more evidence of health impacts are known.”

Of course, consumers stand to be impacted by legalization, too. As it stands, cannabis users are at higher risk of being charged higher premiums than non-users. And while it may be tempting to lie about how much you use, that strategy could ultimately backfire on you when it comes time to make a claim, said lawyer David Share, who specializes in insurance claims. 

Insurance companies can deny any claims where it’s founded the policyholder didn’t tell the truth. That means a benefit might not be paid out if you die and it’s found that you smoked cannabis frequently when you said you didn’t.

“Disclosure is very, very important on these applications to be accurate … Insurance companies will look under every rock to find some way to not pay,” said Share.