Why are so few national insurance companies in cannabis? The complexities of cannabis legislation make it really difficult for insurance companies to support cannabis businesses. James Whitcomb the CEO of Frontier Risk joins Dan Humiston to talk about how they're providing insurance companies with the data that they need to ensure cannabis. Produced by PodConx MJBulls - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston James Whitcomb - https://www.linkedin.com/in/jameshwhitcomb/ Frontier Risk - https://www.frontierrisk.com/ Recorded on Squadcast - https://squadcast.fm/
Why are so few national insurance companies in cannabis?
The complexities of cannabis legislation make it really difficult for insurance companies to support cannabis businesses. James Whitcomb the CEO of Frontier Risk joins Dan Humiston to talk about how they're providing insurance companies with the data that they need to ensure cannabis.
MJBulls - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
James Whitcomb - https://www.linkedin.com/in/jameshwhitcomb/
Frontier Risk - https://www.frontierrisk.com/
Recorded on Squadcast - https://squadcast.fm/
Dan Humiston 1: [00:00:00] show.
james-whitcomb_1_12-01-2022_153228: Thanks for having me. Good to be here.
Track 1: Well, I've been really looking forward to speaking with you today. my family was actually in the, in the insurance business,
dan-humiston_24_12-01-2022_133223: I
Track 1: know how important insurance is for companies to get started. Why are so many well known insurance companies.
ignoring or avoiding cannabis companies, or not selling can insurance to cannabis companies.
james-whitcomb_1_12-01-2022_153228: Yeah, it's, it's a great question. I, I think the answer is really twofold. Know, one is the stigma, And alongside that
dan-humiston_24_12-01-2022_133223: about how.
james-whitcomb_1_12-01-2022_153228: a perception that this is still in the gray. if you are a hundred year old insurance company with a 30 billion balance sheet, and your general counsel's coming back to you saying, well I think technically this is okay, but we're not exactly sure.
Are you really gonna take that risk? and disrupt, know, [00:01:00] what is already a, a pretty stable business, on something
know, that you can't really get a straight answer
on?
And, and let's face it, given the sort of patchwork of, of regulatory answers, you know, from different executive branch
bodies,
Track 1: S kinda hard those things together.
james-whitcomb_1_12-01-2022_153228: a rock solid legal opinion.
it are in it because they've, they've gotten to that answer, which is that, you know, as a service who's not aiding and abetting in the, in the trafficking of a Schedule one substance, this isn't an issue.
dan-humiston_24_12-01-2022_133223: That's
james-whitcomb_1_12-01-2022_153228: the second thing is really probably lack of data. Insurance is something that relies on historical data to predict the future, right?
Track 1: Mm.
james-whitcomb_1_12-01-2022_153228: it's actuarial data. If there isn't a lot of that out there, It's pretty hard to think through how you're gonna price risk in the future. , it's pretty hard to predict, , is this growth facility in Florida, , gonna be destroyed by a catastrophic weather event?
Cause we haven't seen that yet. So those are really the two reasons, and I, [00:02:00] I don't, I don't blame them for not jumping in. Our company's here to
hold
their hand into the space with data so that they can make, , better decisions for a more efficient market.
Yeah.
Track 1: Yeah. You you, you make a really good point. Th. The fact that they're not in the space creates a business opportunity, and you guys are filling that, void by providing the information and the, and the services that they're not willing to provide. you've, You fashioned yourself as a, as a tech enabled insurance ecosystem.
Maybe define that a little bit more for us.
james-whitcomb_1_12-01-2022_153228: Yeah, so we
Track 1: Think that a lot of lessons can happening
james-whitcomb_1_12-01-2022_153228: the
InsureTech
Track 1: industry, which is an industry that
james-whitcomb_1_12-01-2022_153228: sprang up to help reinsurance capacity or carriers
Track 1: better.
james-whitcomb_1_12-01-2022_153228: the risks
that they're covering. And, and, and this has been done in virtually every other it's shipping. Or
dan-humiston_24_12-01-2022_133223: Construction.
james-whitcomb_1_12-01-2022_153228: side,[00:03:00]
there
are companies
Track 1: are C that in
dan-humiston_24_12-01-2022_133223: and
james-whitcomb_1_12-01-2022_153228: right? Whether it's a better understanding of weather patterns or
dan-humiston_24_12-01-2022_133223: it's,
james-whitcomb_1_12-01-2022_153228: connected to the internet of things that can monitor what's happening on an insured property on a real time basis, and
dan-humiston_24_12-01-2022_133223: and
Track 1: that,
james-whitcomb_1_12-01-2022_153228: back to capacity or capacity in general. So that
Track 1: so that.
james-whitcomb_1_12-01-2022_153228: change the rate in the future. If, if a company is becoming less risky over time
Track 1: Mm-hmm.
james-whitcomb_1_12-01-2022_153228: raise
it if they're becoming more risky over time. Right? Same thing with weather, weather patterns. Those are always evolving,
and
Track 1: and we believe that there is.
james-whitcomb_1_12-01-2022_153228: in cannabis to start doing that so that when comes in, We can show them what is risky about a cannabis We think we have an edge too, because we're a team populated by former vertically integrated operators. So if you're lo a large [00:04:00] insurance
Track 1: Large insurance,
james-whitcomb_1_12-01-2022_153228: trying
to feel your way around in terms of how to price risk.
Track 1: Mm.
james-whitcomb_1_12-01-2022_153228: think there's no better people to talk to than a team that has watched an extraction explode because certain SOPs weren't followed. seen a crop, die off for a certain reason. seen a worker's compensation claim. be because
dan-humiston_24_12-01-2022_133223: Manage.
james-whitcomb_1_12-01-2022_153228: in a facility. We
Track 1: we know that when workers are well-managed, they're safe, and so on and so forth. Mm-hmm.
james-whitcomb_1_12-01-2022_153228: that across, over a dozen different product lines
Track 1: Mm-hmm.
james-whitcomb_1_12-01-2022_153228: directors and officers. Insurance liability, L P L.
Track 1: know,
dan-humiston_24_12-01-2022_133223: know, treating t L.
james-whitcomb_1_12-01-2022_153228: you know, excess property layers. So, there are a lot of opportunities, I think, to bring efficiency to this market.
Track 1: I think for our listeners, sometimes it's hard to get your head around just how many different businesses and how many different insurance needs each of these businesses have, and [00:05:00] I know a Businesses within the cannabis industry are actually required by their license to have insurance.
Is that, true across the board or is that just in some states?
james-whitcomb_1_12-01-2022_153228: It. So the short answer is, is yes, it's true, but like everything in cannabis, it's more nuanced than that.
Track 1: And
james-whitcomb_1_12-01-2022_153228: it's nuanced against sort of the matrix of state by state rules and regulations,
Track 1: one of the reasons I'm lettering this,
james-whitcomb_1_12-01-2022_153228: is because in cannabis, you know, you're dealing.
you
know, 50 dimensional
matrix
of of, of, regulatory systems. Insurance
dan-humiston_24_12-01-2022_133223: sure it can.
james-whitcomb_1_12-01-2022_153228: regulated on the state level. And so feel like we have the team to sort of put those two matrixes together and whether you wanna call that four dimensional, 10 dimensional, whatever whatever I would say
say
cannabis is a little more complex
as
far as how the regs vary from state to state than insurance is.
But know , it's a sandbox. We're comfortable playing in. I, I'd say to double click on that answer, the core
kind.
of [00:06:00] very basic policies related to employment liability,
and, and general liability.
Track 1: And these are things you,
james-whitcomb_1_12-01-2022_153228: count on as being kind of required by law across every state.
Track 1: it's not until you get
james-whitcomb_1_12-01-2022_153228: some of the higher value
policies
policies where state by state, you know, cannabis regulators require different things. I,
Track 1: what I, what I think the real opportunity is.
james-whitcomb_1_12-01-2022_153228: is working with state regulators to educate them on why certain things should or should not be required.
Track 1: Oh.
james-whitcomb_1_12-01-2022_153228: let's face it, the people who built the cannabis they did that with all the state by state regulators as far as helping
dan-humiston_24_12-01-2022_133223: mm-hmm.
james-whitcomb_1_12-01-2022_153228: They, they absolutely did. were the ones that were saying in the beginning, you gotta have two drivers in the home delivery car for, for X, Y, and Z reasons.
And this is why it protects the company and this is why it protects the consumer. And then those same people when they realize what kind of cost structure that implied, tried to work with the regulators to unwind all that, this is a [00:07:00] regulated business where there's still the opportunity to help write the rules for the benefit of the consumer the insured client.
Track 1: read on your website that you have a proprietary tech platform to help you. consolidate all this data , and, for lack of a better word, spit it out in a fashion , , the big insurance carriers are comfortable with.
Can you talk a little bit about this tech that you've guys have developed? Yeah. So that's,
dan-humiston_24_12-01-2022_133223: we're actually be working on.
james-whitcomb_1_12-01-2022_153228: are, there are parts of it that are done, there are parts of it that are yet to be built. Obviously we're, you know, a company that just launched and, building and perfecting that tech stack is, is gonna be a lifelong mission.
Track 1: Um, the part that.
james-whitcomb_1_12-01-2022_153228: really interesting right now, Is taking all the things we know about every square inch of the cannabis value chain and loading
dan-humiston_24_12-01-2022_133223: that
james-whitcomb_1_12-01-2022_153228: a proprietary database against different risk management policies, basically
Track 1: different.
james-whitcomb_1_12-01-2022_153228:[00:08:00] of insurance, and
Track 1: having the database,
james-whitcomb_1_12-01-2022_153228: out,
our
Track 1: expertise,
james-whitcomb_1_12-01-2022_153228: area, the value chain touches this product and our expertise
Track 1: matter
dan-humiston_24_12-01-2022_133223: We
james-whitcomb_1_12-01-2022_153228: Touches that product
Track 1: as
dan-humiston_24_12-01-2022_133223: as
james-whitcomb_1_12-01-2022_153228: in that way.
Track 1: Okay.
james-whitcomb_1_12-01-2022_153228: it affects pricing, or it should affect pricing that way. So
Track 1: There's a very,
james-whitcomb_1_12-01-2022_153228: financial model that we've built that we use, and that is running right now,
dan-humiston_24_12-01-2022_133223: uh, that links
Track 1: all things together to,
james-whitcomb_1_12-01-2022_153228: spit out predicted loss right in the aggregate and product line by product line.
And
Track 1: that's, that's
james-whitcomb_1_12-01-2022_153228: what's real and proprietary in being built on, built upon right now.
Track 1: Yeah. And we.
james-whitcomb_1_12-01-2022_153228: a lot more wood to shop on that. InsureTech is an incredibly advanced space. a highly competitive space. and my sense is that we'll be building this technology company for many, many years.
Track 1: Yeah, it's like it. It's one of the things that will. [00:09:00] never really be completed. It's, it's always gonna be refined and, and taking advantage of new technology and new information. you mentioned that you just launched the company, Are you raising money or will you raising money or will there be opportunity for investors to participate in your growth?
james-whitcomb_1_12-01-2022_153228: Yeah,
Track 1: absolutely. we.
james-whitcomb_1_12-01-2022_153228: raising money right now. We're raising our seed ground. we're well into that, getting good traction. It's obviously not the easiest, macroeconomic landscape given all the volatility or
cannabis
capital markets landscape, in, in order to do this. But, but the reality is we're not a cannabis company.
We're an insurance company. And I, I think,
think,
I think those tailwinds are, are, are what's really making the difference in our
Track 1: Mm-hmm. , and.
james-whitcomb_1_12-01-2022_153228: look, I.
our
goal I think, is to, like any company, create value for our stakeholders. But, the interesting thing about this is there are different ways to participate, we would like to participate in the reinsurance space. who invest in reinsurance expect a very different return in a very different risk profile. [00:10:00] Than people
dan-humiston_24_12-01-2022_133223: who are
james-whitcomb_1_12-01-2022_153228: in the retail brokerage side of our space. Right?
dan-humiston_24_12-01-2022_133223: mm-hmm. different.
james-whitcomb_1_12-01-2022_153228: profiles, different risk adjusted returns, right?
Track 1: and so
james-whitcomb_1_12-01-2022_153228: I, I I think
Track 1: appeal to.
james-whitcomb_1_12-01-2022_153228: wide audience. so yeah, we'll see. We're, uh, we're having fun
Track 1: Yeah, it's, it's, it's a really interesting business model that you have, and again, you're filling a void that would be in other industries would not be available, but because of the newness of the industry and the complexity, the industry. You've planted your flag in a, in an area that nobody's participating in.
I can see where there's a really good opportunity for investors to participate with this, and there's a big upside.
james-whitcomb_1_12-01-2022_153228: say in response to that right, is like, I wanna be very clear, we are not the only ones trying to solve this problem. it's such a glaring problem that there are,
I
wouldn't say there are a lot of people working on it, but, but we're not the only ones.
Right?
[00:11:00] And
people will figure
figure
this out alongside us. The good news is the market is so woefully under. That there are, there's room here for multiple winners,
and,
and we encourage that. I, I was at parallel doing something I thought was mission driven. We were there to make money and we were there to make people's lives better.
Let's, let's be clear,
Track 1: More insurance solutions.
james-whitcomb_1_12-01-2022_153228: figuring it out that aren't me and my team, that's good for the industry. And let's face it,
this industry is on the precipice of really falling apart unless some of these institutional solutions come in very quickly.
Track 1: Well, thank goodness we have you on on that track. We're gonna have all the frontier risks information in the show notes. If you want to learn a little bit more about their company or if you wanna talk to them about possibly participating in their growth, I'm sure somebody from James team would be happy to speak with you.
James, really interesting what you're doing and I appreciate the effort that you're putting in and good luck with this.
james-whitcomb_1_12-01-2022_153228: Thank you very
dan-humiston_24_12-01-2022_133223: very much.
Track 1: Was great to [00:12:00] on. Thanks.
dan-humiston_24_12-01-2022_133223: you.
james-whitcomb_1_12-01-2022_153228: I appreciate it.