Photo by BLACK PRESS news services Matt Panelli, left, and Steven Bigg are the co-owners of Lacombe’s Merry Guanas. Panelli says insurance rates are too high for cannabis retailers.

Insurance costs a challenge for pot retailers, store owner says

Insurance is a steep cost for the new retail cannabis industry, says a central Alberta business owner.

Matt Panelli, co-owner of Lacombe’s Merry Guana, said it was difficult to get an insurance quote when he first started his business last fall.

He and his partner were only able to get quotes from two companies.

“The first quote we got was five times the amount a liquor store would pay for similar coverage, and the other one was two-and-a-half times,” said Panelli.

“So we have to pay two-and-a-half times what a liquor store pays, even though all of our product has to be stored in a vault that we had to build – it’s essentially like a bank vault.”

Panelli is also frustrated by the steep delivery fee his business pays for orders to be shipped by the Alberta Gaming, Liquor and Cannabis agency – about $225 per order (usually about once a week).

Based on conversations he’s had with a liquor store owner and a friend, Panelli believes the alcohol industry does not pay such a high price for its deliveries.

“We’re a small operation here, and if we get a delivery every week, we’re looking at $12,000 a year, which is a massive amount for a small operation like ours,” he said.

“We have to sell a huge portion just to cover the cost of delivery.”

AGLC spokeswoman Heather Holmen said the $225 fee covers the cost of insuring the product while it’s in transit.

“For cannabis specifically, this is a postage-stamp delivery fee by order, with no minimum order quantity.

“Meaning it doesn’t matter if you are in Edmonton, Fort McMurray or Medicine Hat; the fee is the same to level the playing field,” Holmen said.

“There are several added carrier obligations related to security, and cannabis, as a commodity, is new, with lots of unknowns such as fewer carriers offering to service this commodity – especially those with U.S. operations, and the insurance is more specific.”

Holmen said there isn’t a flat delivery fee for liquor products, as there are many variables, such as geography, order size, frequency, value of product and service requirements.

It’s difficult to characterize the delivery fee as lower, as liquor licensees are charged on a different basis, Holmen said.

Darren King, commercial broker with Sims & Associates Insurance Services in central Alberta, said cannabis is a specialty product. This means many major insurers don’t cover the new industry.

He said insurance companies rely on data, history and claim experience, so they shy away from anything that’s new, such as cannabis retailing.

King believes comparing alcohol and the cannabis industries wouldn’t be accurate, as they are two separate activities. He believes with time, the insurance cost will go down for cannabis businesses when there’s more competition in the market.

Panelli said it’s already been more than a year since the industry was legalized.

“I understand insurance companies are being cautious, but now we’re over a year into legalized cannabis, and there are no issues in delivery.

“At what point do the insurance companies stop looking at this as risky and look at the true track record of this.”

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