Editor's Note: This part of a series of cannabis broker profiles, in which Insurance Journal explores why and how these people got into the business, the ups and downs of insuring cannabis, as well as a few tips for those interested in a small business. professional development.
David M. Kennedy's journey to the insured cannabis space was a mix of following tradition and being innovative.
Kennedy, founder and CEO of Purple Risk Insurance Services, began his journey in insurance while in college in 1997 as a summer intern at the global real estate firm Sedgwick Group, following in the footsteps of his father, Geoffrey Kennedy, who spent most of his 30 multi-year careers at Sedgwick.
Kennedy joined Marsh in Boston full-time after graduating from the University of Vermont in 1999, and shortly afterward tried to break out of his family career – his brother, also called Geoff Kennedy, is with Marsh – by changing paths and to study law. .
After graduating from the University of California, Hastings College of the Law in 2003, he spent approximately eight years as an insurance coverage attorney and attorney for specialist carriers, then returned to the insurance industry in the role of claims professional in 2012. / counsel. at Lexington Insurance Co. He was promoted in 2014 to lead product development at Lexington.
In 2019, he launched his own retail insurance brokerage, Purple Risk, which focused exclusively on the cannabis industry.
Kennedy spoke to Insurance Journal about his experience as a cannabis broker.
Insurance diary: Why did you end up in the cannabis and insurance world?
Kennedy: I first started researching the cannabis space as a business opportunity in 2013-2014 when I participated in an AIG / Lexington Insurance Innovation Bootcamp program. I became increasingly intrigued by the growth potential of the cannabis industry and the industry's critical need for specialist insurance solutions.
While leading the Lexington product development team, we explored the possibility of launching an E&S cannabis insurance program at Lexington. But AIG, like many major airlines, was uncomfortable entering the cannabis market, mainly because of its federal stance on marijuana.
After leaving Lexington in 2019, I combined my passion for innovation and an entrepreneurial mindset to take the leap to starting my own retail insurance brokerage specializing in the now rapidly emerging and constantly evolving cannabis industry.
Insurance diary: Has this been a good financial decision so far?
Kennedy: My experience may be different from many of the brokers who feature in these Cannabis Broker Spotlight segments since launching a new retail insurance brokerage and building it from the ground up from the 2018 timeframe.
I've experienced many of the challenges of starting a new venture, while also working through the intricacies of the cannabis market and of course the significant disruptions caused by last year's COVID-19 pandemic. grow the Purple Risk brand steadily and take great pride in serving as our clients' most trusted advisor – not just as a broker / agent – advising them on all aspects of compliance and risk management to better protect their businesses and their total cost of risk.
Given the anticipated growth trajectory of the cannabis industry, the financial benefits should follow over time as we grow Purple Risk along with our customer base.
Insurance diary: What's the hardest thing about the cannabis industry to deal with?
Kennedy: Some of the most challenging aspects of the cannabis industry and, in turn, the cannabis insurance market, are the same traits that have drawn me to space: the unique state-regulated markets emerging from decades of prohibition; constantly changing cannabis and hemp laws and regulations; emerging exposures and changing risk profiles; the lack of coverage options and limited markets, among other challenges, all make the cannabis industry particularly intriguing and well suited for a broker and lawyer like me with a background in insurance coverage law and E&S product innovation.
In short, it is the challenges of the industry itself that make it so exciting and varied for me; Of course, there are difficulties navigating the cannabis insurance field: from reduced insurance limits, to shallow or even no coverage options for some exposures, to high premiums for products such as driver and officer liability insurance or commercial car; and increasingly restrictive safeguards and exclusive policy language in all coverage areas.
Insurance diary: Which insurance product is the hardest to obtain for your cannabis industry customers? Why?
Other brokers in these Cannabis Broker Spotlight segments have addressed the difficulty of obtaining certain insurance products for industrial clients, including D&O liability, employee compensation and cyber liability, which only have a handful of markets, for ownership capacity as most carriers continue to do so . avoid cannabis risks from federal illegality. We have faced similar challenges at Purple Risk.
As recently noted by Insurance Journal, industry insiders predict that we won't see a significant increase in capacity over the next twelve months, and at Purple Risk, we similarly see carriers pursuing 15% to 20% rate increases on no-loss renewals.
In view of a choppy cannabis market for 2021, it is important to carefully review your coverage options, especially on renewals, as markets and carriers' appetites vary considerably in the constantly changing and fluid landscape.
Insurance diary: What two or three tips do you have for brokers starting out in cannabis insurance?
Education, specialization and differentiation.
Getting to know the intricacies of the cannabis insurance market is critical in order to succeed – and excel – in this space. Take every opportunity to educate yourself about the state-specific laws and regulations that apply to the industry, pending legislation, carrier participants, product offerings, and of course, study the highly customized forms for yourself, among other things to to help protect brokerage from an E&O position and better position it to advise your clients.
When you enter the space, make a commitment to specialize in the industry and become a subject matter expert; and seek partnerships with industry leaders to better serve your customers. Purple Risk is an appointed broker with the National Cannabis Risk Management Association and we partner with several industry experts in areas including law, compliance, banking and marketing.
Finally, what is your value proposition? Ask yourself what makes your agency different, as we as brokers source mostly products from the same small pool of cannabis insurance markets.
My background is as an insurance coverage attorney; I am not aware of any other licensed attorneys who have switched to cannabis insurance brokers. That professional background gives me a unique lens and level of expertise to better meet the risk management needs of our clients and to differentiate Purple Risk's services and value proposition.