The CBD market has exploded in recent years, hitting $4.6 billion in sales in 2020. And the growth is expected to continue, with projections as high as $20 billion by 2025.
Fueled by the passage of the 2018 Farm Bill that legalized hemp-derived products such as CBD, and encouraged by additional federal legislation that has been proposed, such as the Safe Banking Act and the Hemp and Hemp-Derived CBD Consumer Protection and Market Stabilization Act, more and more businesses are looking to get into the CBD market.
The beverage industry, in particular, is seeing a huge spike in growth. Currently, beverages only make up 5% of the CBD edibles market, but research firms are projecting a $2.5 billion beverage industry by 2026.
With some regulatory questions still up in the air, however, it is important to understand the risks associated with insuring CBD-related businesses.
Dubious Claims About CBD Products Can Create Major Risk Exposure
When conducting risk assessments for liability coverage on CBD products, one of the most important things to look at is the claims the products make about their health benefits. Any wording or labels that offer to treat, cure, or prevent a disease or illness are a big red flag. The FDA has approved one specific drug that contains CBD to treat some forms of epilepsy, but no other medical uses have been approved thus far.
Fierce competition, however, sometimes pushes marketers to overstate the potential health benefits of their products and make claims that are not scientifically supported. And that leads to an elevated risk exposure. Here are just a few such claims we have seen on CBD products that created an unacceptable level of risk:
- A product marketed as “COVID-19 Prevention CBDA”
- CBD products being described as “anti-tumor,” or having the ability to “kill cancer cells” or “prohibit further growth”
- CBD products advertised as “treating cancer-related pain”
These examples show why it is so important to have a legal counsel or expert look over any product-related claims to make sure manufacturers or retailers are not over-promising, and creating added liability.
Purity Standards and Other Liability Issues
In addition to the issues surrounding labeling, it is important that CBD manufacturers have independent third-party testing to ensure their products do not contain more than 0.3% THC, and are free from bacteria, harmful chemicals, or other foreign substances. Products with more than 0.3% THC would be considered cannabis products, and have a different risk profile. Similarly, some companies have started making CBD products with alcohol and tobacco, which creates an added risk that generally falls outside Admiral’s risk profile.
Work With the Insurance Industry Experts in CBD
When writing liability insurance policies for a rapidly evolving industry like CBD, it helps to have an expert who understands the regulations, technology, and possible risks of exposure. Admiral Insurance Group provides that expertise to our wholesale brokers, and their retail brokers who work with businesses that grow, process, and sell hemp, CBD oil, and cannabis products. If you are a retail insurance broker, locate an Admiral wholesale partner. If you are a wholesaler, contact us about becoming a premier partner.