GrowerIQ & FCA Insurance - How to Save Money on Cannabis Insurance

HighIQ Webinar Series: How to Leverage your Cannabis ERP to Save Money on Insurance

Alternative Text
GrowerIQ is the operational backbone ERP that unites the fragmented systems required by cannabis production facilities around the world. The company now powers facilities in more than a dozen countries, and four languages - enabling true seed-to-sale traceability.

GrowerIQ & FCA Insurance join forces to advise on all things tech and cannabis insurance

To prepare yourself for this information-packed series, we highly suggest that you check out our recent post, Cannabis Software: Your Questions, Answered. It’s a quick read, so it should only take about 10-15 minutes. Then you can dive straight into the series!

On July 13th we will hear from our very own Rob Perry & Zaki Amer, along with two amazing guests, Kyle Muscat and Tyler Tisdale, from FCA Insurance.

GrowerIQ & FCA Insurance

The teams will collectively be sharing tips on what to know about insuring your cannabis cultivation/manufacturing facility, and how to efficiently use your seed-to-sale platform in order to be successful, yet cost-effective.

After listening to this series, we urge you to learn more about ERP using our resources. We want to save you the hassle of doing your own research and having to validate it all: ERP vs. MRP, Cannabis ERP software, Cannabis Cultivation ERP Software, and if you’re curious about MRP, check out “which software is used for mrp“.


Rob Perry  0:31  

All right, well, hello everyone. I see there are a few attendees that our are sort of rolling in here a couple minutes late fashionably late, as aware. But yeah, I just wanted to welcome everyone to the HighIQ webinar series. So this is an educational webinar series that focuses on areas of interest for members of the cannabis industry, especially licensed producers. Today’s session is related to insurance in the cannabis industry specifically how to leverage your cannabis ERP to save money on insurance. Now, I know there are some groups online from a range of jurisdictions. Although FCA the group joining us today is exclusively Canadian and its orientation. There is still value from an international context, cannabis insurance in Canada has been many years in the making. And I know Kyle and Tyler will dive into a little more detail on what that looks like. So regardless of jurisdictions, I’m sure people wound up having similar options to look at. If they don’t already if, if it’s an early cannabis market and early cannabis jurisdiction, this might be very new material for a lot of people and quite helpful is there. They’re trying to make some decisions from their side. So again, big thank you to both attendees and participants. Quick Intro we have Zacky from GrowerIQ. And Kyle and Tyler from FCA. So, you know, just a bit of background about our companies, for those of you who haven’t been exposed to us before, we’re GrowerIQ. We’re a seed-to-sale software program or companies. We have global projects of all different sizes, handling both cultivation and processing. We’re active on five different continents and 14 different countries. We’ve started in Canada, and we’ve been operating for about five years. So when it comes to what’s going on within facilities, I mean, I think I think we’ve seen it all. And I think exactly, especially if you need more than that. So we can definitely answer any questions later on if you have them. From a functionality standpoint, you know, exactly, we’ll get into it a little bit later. But at a high level, our software covers everything from you know, activity tracking, Batch Records, cultivation, processing, CRM, you know, inventory, inventory reporting, regulatory reporting, as well as, you know, different QA functionalities. But, but again, we’ll get into a bit more of this a little later on. And for the moment, I’ll just, you know, reach out to Kyle here and see Kyle, do you mind introducing FCA? 

Kyle Muscat  3:47  

Yeah, absolutely. Thanks, Robin. And glad to be here. It’s great to see participants from all over attending this webinar. As Rob mentioned, my name is Kyle co lead the cannabis practice alongside my colleague Tyler here at FCA Insurance Brokers so quickly about FCA. We are a commercial mid-market Insurance Brokerage located are headquartered rather here in Toronto with three Canadian offices. We’ve been in Canada for over 100 years, remain privately owned and independently operated. And we started the cannabis insurance practice around six years ago with a focus on licensed producers processors and some related operations. Tyler maybe I could hand it off for a quick intro. 

Tyler Tisdale  4:37  

Yeah, absolutely. Thank you Kyle. I’m Tyler says Dale. I’ve been an insurance broker for about 10 years now. Started while still a student, Brock University. I’ve been with first broadcasting Anderson at CAA since September of 2015. Throughout my career, I’ve done some personal lines sports insurance, so small commercial mid market commercial large commercial, now specializing on providing coverage for the cannabis industry, as well as food and beverage manufacturing. I suppose you can say cannabis food and beverage kind of goes hand in hand is a good combination. So I certainly enjoy my role here. I like working with my clients, of course. And I really do appreciate the time for everyone who’s on this call. Thank you very much for joining. And I hope you gained some knowledge from this.

Kyle Muscat  5:32  

Great, thanks, Tyler. See, I guess we can we can jump right into it. To kick things off, we thought we would start with a higher-level overview of the cannabis insurance marketplace. Of course, this is with regards to Canada, as many on the call are likely familiar, those operating in the cannabis space definitely faced some additional challenges and barriers to access with respect to banking and financial services. Unfortunately, this trend does hold true within insurance. To some extent. I just the main point I’d like to emphasize here is that there’s quite a limited number of Canadian-domiciled insurers that are willing to entertain cannabis-related risks. And we can point to a couple of reasons as to why this may be. Typically they have limited internal underwriting expertise with regards to cannabis production facilities and grow operations. You know, it’s only been five years or so since legalization. There’s also a lack of historical claims, and actuarial data which they rely upon for their pricing decisions. And then of course, man, many do have ties to the US where there is that stigma remains federally illegal. So those with head offices, their ownership groups, typically just say no, we’re not going to opt in to look at these types of companies. The limited number of suppliers does result, you know, in less competitive, middle, less competitive market environment, so to speak. And I guess it’s you know, primarily characterized by relatively larger premiums, when compared to some related industries in manufacture, food and beverages. Tyler had alluded to earlier, less selection in terms of insurance providers, obviously, and more stringent terms and conditions in the underlying policy as a function of there just being less competition. As a result, you know, this certainly demands greater placement, creativity, we’re often having to look outside of insurers in Canada, looking to the UK, I’m sure many on this call, are likely familiar with the Lloyds of London marketplace, as well as some of the offshore specialty carriers located in domiciled in the in the islands. But just to kind of summarize this quick market overview, you know, the market is quite nuanced and tricky to navigate. And really, we can only emphasize the importance of working with a broker that’s focused in the cannabis space and understands, you know, where, where certain coverages can be placed, and is able to achieve, you know, competitive terms and stay ahead of the curve as it continues to change and evolve, which we see by the month and by the year. Of course, we can go into this a little bit more in the Q&A at the end. But Tyler, maybe I could hand it off to you for kind of a quick summary on the different coverage types that producers may look to consider and as part of their overall risk management strategy.

Tyler Tisdale  8:53  

Yeah, absolutely. Thank you, Kyle. And I will keep this fairly high level. There’s any questions at the end of the presentation, please, of course, feel free to ask. What we’ve identified here is what we consider the six most important coverages for producers to carry. Starting with property, plant and equipment can consider that the classic type of insurance, that’s coverage for your building equipment within the facility, the plants themselves should an instance of like a fire or water damage occur, you have insurance protection to to cover those losses. There’s that of course general liability insurance, usually associated with the standard slip and fall claim. Now for licensed producer. Sure if there’s a fire at the facility, and that spreads to someone else’s neighboring property, there wouldn’t be insurance in that instance. But the most important aspect of a general liability policy for producers would be the products liability coverage, shirt and individual sustainable at the end Because of consumption of your product, and a suit is brought against the producer because of that, there wouldn’t be coverage under the general liability of your insurance package to cover that instance. There’s also directors and officers liability coverage, directors and officers liability coverage. In my experience gets misconstrued as a form of benefits insurance. But that’s not quite what it is at all. directors and officers insurance comes into play to ensure the directors and the senior executives of an organization should they be brought into a suit by invested stakeholders alleging that the directors and officers were negligent in guiding the affairs of the organization. Or if they’re allegations of mishandling the organization’s finances, there would be coverage in that instance, directors and officers insurance mainly protects these directors and officers against their personal assets, should they be brought into a suit. Moving on there is cyber insurance given the Rogers outage that we experienced here in Canada on Friday, it says coverage is fairly top of mind comes into play. Should there be a cyber attack against an organization embedded within a cyber policy, there is first-party coverage with pay the cost to investigate a breach do forensic analysis of what happened and essentially covered the organization’s costs that they’ve incurred because of the breach. There’s also third-party liability cyber coverage, should a suit be brought against an organization because a cyber criminal was able to access confidential or sensitive information that belong to a third party that was being held by the organization who suffered cyber attack. That organization is that dude because of that instance, there is coverage there as well. There’s also a specialty in forms of insurance, mergers and acquisitions being one the other being excise bonds, which my colleague Kyle will touch on later in the presentation. And then there is the all important product recall insurance. Now, product recall, as the name implies, provides insurance coverage to protect an organization against the cost that they incur. Due to a recall, it’s required for Provincial wholesalers and the provinces of Ontario and BC. They’re mandated to carry $15 million limits and $10 million limits respectively. product recall claim can be triggered by several different instances, one being mislabeling and packaging errors, and other being malicious tampering of product either being accidental contamination of product, as well as a government-mandated recall. product recall policy does cover both voluntary and involuntary recalls. The cost of recalling the goods themselves is ensured, as well as notification expenses, such as reaching out to customers, other businesses within your supply chain who are impacted by the product recall, there’s also coverage for the withdrawal of the product from the market, shipping of the product to various locations for storage and then to be disposed of. There’s also some insurance coverage to pay for the cost of additional labor that’s required to combat the product recall and to essentially cover additional expenses that were incurred. Because of the recall, there’s reputational brand protection, such as hiring a PR firm to help get the message out about why the recall occurred, and do a little bit of damage control there. There’s also costs to cover some legal expenses if an authorized representative is is required to work with compliance officers and whatnot because of the product recall, there’s some insurance there as well. And finally, should the producer lose revenue because of the recall, product recall policy will then respond as well to cover some of that loss revenue because the product has been taken off the market. From an insurance perspective, there are several underwriting considerations that are taken into effect when pricing a product recall policy or when offering coverage. We’ve highlighted some here on the slide. Very important, of course, is a form More written plan and procedures that are already in place known by an organization’s employees, should a product recall be triggered. There’s also of course product preparation, procedures and documentation, specifically relating to quality control. Having those quality control procedures in place to ensure product is safe when it goes to market is of the utmost importance to insurance companies when issuing this type of coverage. There’s also an organization’s ability to demonstrate compliance tracking, which of course can be done through software. You’ll see here at the bottom over 67% of recalls are due to simple mislabeling and packaging errors, which have unfortunate, very costly, very, very costly recourse involved. So to avoid those errors is of the utmost importance. For GrowerIQ software, does have compliance tracking features embedded to help ensure such instances and mislabeling and packaging errors are avoided. Maybe Zach, you can take it from here to give those on the call, bit of insight into what exactly GrowerIQ can offer them through your software.

Zaki Amer  16:28  

Yeah, so our goal at GrowerIQ was to ensure that we’re able to capture all aspects of cannabis operation under one umbrella to avoid fragmentation. Just make sure that everything is interconnected and you’re able to communicate with inventory with orders with deviations or COPPA. As Rob mentioned earlier, Greg, do you have the capabilities to keep track of your cultivation management process management, all the vendors that you might be working with inventory management. And then on top of that, we’ve also built in a QMS system directly in the software. So we have the ability to generate reports are clickable button, we have the ability to keep track of all the samples, any disruptions that may be happening, along with any Kappas deviation reports and then recalls ask how Tyler was speaking about. And just to kind of show you the functionality that Gorky has to offer. I’ll go through a mock recall with you. The recall that I’m going to be competing today is for mislabeled packages, as Tyler mentioned, are based on mislabeled packages, and I’ve seen it while working in the industry. DCCD values can be mixed up all the time, there could be errors on the label itself, it can match what Health Canada wants on the label, some warning messages could be missing. So there’s a whole bunch of different reasons as to why product could be recalled. And it’s as simple as selecting initiate recall and software, filling out the retaining information. And once the information has been filled out, the system will generate a recall for you. Now once the recall is generated, it is not initiated. Before we initiate a recall, we need to answer a few questions that Health Canada wants to know before we start progressing through it. And the information that the system is able to gather for you might take someone that is capturing all this information on paper with the card other. So as we can see here, this system will be able to capture what the recall details are, are miscible packages, the date that was initiated. And the individual that is owning the recall, we have the license holder information, the name of the license holder, the name of the license holder representative that’s going to be in charge of this, along with their contact information of Health Canada ever wants to get in contact with them. And the system will be able to gather all the product information. So what lot is the recall connected to when was the first time the product was sold? When was the last time the product was sold? How much product was produced? In total? How much product was sold in total? How much product do we have remaining on hand? How many vendors was the product sold to what the different skews were and the different vendors the product was sold to if we want to capture or get a list of all the vendors that we might have sold the product to it’s easy as selecting download customers and the system will be able to generate a CSV document with all the information that you need to be able to start reaching out to those vendors and letting them know about the issue on hand. Now before we get into before we start the recall, we also need to answer a few questions that Health Canada wants answered. And we need to create our we call strategy. So some of the questions that Health Canada wants answered is how are when are you guys going to be informing Health Canada but the issue Health Canada has identified that within the states. So how what information are you gonna be providing them? What is the communication plan look like? What are you going to be communicating to you refines in terms of recall. What how are you going to approach this recall? And then what are the risks that are associated to this recall as well. Once all of that information has been entered into the recall, we are able to generate a report and submit this to Health Canada before we push it into progress. Once we are ready, we have all the investigation completed, we’re able to start the recall. And once we start the recall, we have we can see here that the system will automatically recognize that it is no longer initiated it is in progress, we’ll reach out to all of our vendors will let them know about the assurance and we’ll let them know about how we plan on records and get if we want them to destroy the product if you want them to send it back to us. So we can do a further investigation captured all the details as to how much product was sent out how much product we received, how much product might have been sold. And then we can also keep track of all of that in our in the system as well. And the inventory that we’re receiving back and the inventory that has been destroyed, we can kind of match it with the purchase orders the invoices to see did we get all of the product back was the product that might have been sold. So we can do some further investigation as well. And once we have rectified that issue, we have the ability to enter the call. And the system will then automatically archive it and have that information stored for as long as we want in the software. And then once the recall has been completed, we also have the ability to create deviation reports campus to ensure that this issue never arises. I’m going to hand it back to Tyler for some further insurance coverages. 

Kyle Muscat  21:40  

Excellent, thanks, thank you Zacky. Certainly some great functionality there with regards to the recall procedures and an automated reporting and tracking which we’ll we’ll circle back and touch on near the end of the of the call. But we did want to take this time to just highlight another type of insurance. product that may not necessarily be as well known as some of those that Tyler had mentioned, we think they offer the most value for those of you on the call today. And I mean, most of most of you on the call, or at least those in Canada should be familiar with the X excise duty tax regime that’s imposed upon cannabis producers. And for those outside Canada, maybe I could start with with a quick summary. But basically, as it stands right now, and in general, producers are required to post security to the Canadian Revenue Agency, that’s equal to the highest month of excise duties owed over the past 12 month period. And this can range anywhere from you know, 5000 up to $5 million. And traditionally, this is posted in the form of cash or letter of credit. So I wanted to share some quick details on was a lesser-known product offered by insurance companies that offers a number of benefits to producers, but still allows you to maintain compliance with the CRA. And that’s basically the cannabis excise duty bond. So it’s basically a financial instrument that guarantees the performance of contractual obligations very similar to a letter of credit. I guess the contractual obligation in this case would be paying your your excise duties at the end of the month. The CRA major difference here though, is that it’s underwritten on behalf of the insurance or surety company in exchange for an upfront premium. In terms of benefits, the most immediate benefit is that it instantly allows producers to access the capital that would otherwise be tied up with the CRA. So whether that’s cash that they’re holding, or a letter of credit, which is often collateralized with cash in the bank, you’ll be immediately able to access that and replace for the for the bond. Another benefit would be in the event of a claim the surety company would act in your defense from day one. So if there was any litigation, you’d have their legal team for the CRA is able to make a claim and and collect that money. And then from a financial perspective, the cost of the bond is often lower than what we find company’s internal rate of return. It’s about a one to 3% annual bond rate. So especially when compared to the opportunity cost of you know holding that cash with the CRA. There’s typically some immediate financial benefits when you’re able to access that I guess quick story, you know, we’re working with producer they were holding you know, $5 million dollars cash with the CRA. We were able to get them a bond at a 1% rate. So for 50,000 they were able to access that cash and and use it to fund operations. Now I know there are some Some smaller producers on this call, we thought it’d be worth mentioning the proposed change in the 2022 federal budget with respect to the excise duty regulator security regulations. And when I say smaller producers, that’s anyone who’s paid less than a million dollars in excise duties over the last 12 months. And basically, the government’s proposing that these producers could remit duties on a quarterly basis as opposed to monthly, which is favorable. Although there’s no mention with regards to the security requirement and how that may be impacted. We’re of the opinion that it’s likely going to increase. So the smaller producers may need to increase that security, whether that’s through cash or letter of credit. So it may be worth looking at a bond. And kind of at the bottom here, we just have a quick chart as an example showing you know how much it would cost to get a bond and using a rate of one and a half percent. But I’d been happy to dive more into this during the Q&A. And I guess I can at this stage, you know, we do understand, aside from that product, recon all the other features. There are some automated you know, CRA and Health Canada reporting, you know, automations within the software, and maybe we can hand it back off, and you could walk us through that as well.

Zaki Amer  26:17  

Thanks so much. Yep. So aside from everything else that I mentioned, cultivation, management, processing management, the CRM management, inventory management. Gorky also has automated reporting. And it’s very simple. So one of the biggest pain points for LPS is the monthly reporting. If an LP is not using a seed-to-sale system, gathering all the information from the different departments to fill out a report is extremely challenging. This is our customers, what we’ve done is we built in the health care reporting directly in the system, as long as the system is kept up to date, at the end of each month. With all the activities that are happening on site, the system is able to generate the report at a click of a button. It’s as simple as selecting the year, selecting a month and selecting download. And what the system will do it will download a report of something like this health care report is extremely long, it has over 2300 different tabs. And as you can see here, it does not provide a lot of value. We there’s no visuals to this. But what we’ve done is we built our own reporting tool that is able to take this data and provide a visual so you can see it broken down by different categories. And what we’ve also done is we’ve gone one step ahead, and we’ve also built in safety measures to ensure that the information that the system is generating is accurate. As you can see here, the report that I generated as a error, it says the unpackage extracts, calculation is incorrect. And this could be caused by a multitude of things, such as a rounding error, such as inventory being reported are generating incorrectly, or maybe a user error or say the user forgot to enter that data. At the end of the month or during that month, the system will recognize that and we’ll be able to do the investigation for the clients and rectify that issue before they submit a report to make sure that the information that they’re submitting to help panda is accurate. Now to capture this information, or to get a visual of this information, what we would do is simply copy line two here, and we will paste it into our reporting tool. And in line two here to make sure that the data was copied over correctly, we will go to our reporting period tab you will see the year which is 2022. To see the month which is June, we’ll see the license number for the LP and once we go to the unpacked desktop all the information that we had on that CSV document is now populated and you get the better visual of anything is broken down by seeds is broken down that vegetative cannabis plants will cannabis plants fresh cannabis dried cannabis. And then if we get into any cannabis 2.0 products as well, the system will keep track of all the opening inventory. So, opening inventory is always the closing inventory for the month prior any additions to inventory. So any product that was produced BOD return, the system will be able to capture all that information, any reduction in inventory. So if any product was processed, if any product was packaged or labeled, sent out for testing purposes sold to a cultivator or processor returned, destroyed, lost or stolen. And then the system will be able to gather what the closing inventories are. As you can see here, the error that we had on the previous report is highlighted in yellow, so you can easily identify what the mistake is. And here we can see the mistake. It’s just a rounding error. Health Canada wants everything reported to a precision of three. So this is something that is on the reporting tool that we’re pointing to to a minute round up or might round down, which might cause the error but this is a very simple fix. And as you can see, every single activity that is recorded in the system will be populated on this report here. And now, how does this relate to dB 304 Um, so the vizzion reform is almost identical to the Health Canada reporting tool. If I give you the visual, I wouldn’t be three under formulas like, we can see here that we have our Brian and fresh cannabis. We have our whole cannabis plants, we have a Bible seeds, and we have our vegetative cannabis plants we have what our opening inventory is, what are additions to inventory are what are reductions to inventory. And then finally, what are closing inventory. And it’s as simple as plug and play reporting tool has all of the same categories as the V 300 form, we have our opening inventory. So we take these values, plug it into the V 300 form, we have all of our additions to inventory, we take these values and plug it into the v2 and the form. And the same thing with a reduction signatory. We take these values that we see on the screen, plug them into the v3 on their form, and you should be able to submit that report on a timely manner.

Zaki Amer  30:50  

Back to us.

Kyle Muscat  30:53  

Excellent. Thank you. Thank you. Again, there’s Zacky. For the for the demonstration, I meant as we were kind of starting to wrap this up as we transition to our last slide here before we open it up for the Q&A. But I mean, the title of this webinar was you know how to leverage your cannabis ERP to save money on insurance. So I figured we could maybe address that directly. And now this isn’t to say that there’s an exact amount of money that you’ll save. Wherever there’s certainly some ways that having you know an ERP system can complement your insurance purchase on an annual basis, and more holistically on your overall risk management strategy. So we didn’t touch on this necessarily, but we do know the GrowerIQ platform does allow for some hardware integrations and monitoring. And that certainly supports you know, physical asset protection through you know, the co2 heat, humidity water monitoring. And that’s especially true, you know, for inventory, gauging and getting early alerts for fluctuations in temperature or humidity, as great early warning signs be able to get ahead of any potential loss and save you money for claims and down the road in subsequent renewals. product recall, you know, we did touch upon this a bit earlier. But having a system can certainly cut down on loss frequency due to you know, compliance management, reducing those instances of mislabeling or perhaps packaging errors, as Tyler was talking about. And then of course, loss severity, through the inventory and supplier tracking where that product is going. And then fully integrating that into your recall plan. There’s some other you know, less direct or qualitative benefits, I guess on the one feature there for inventory valuation, right gives you a snapshot of the product that you’re holding at any point in time. And of course, that’s important to ensure that you have adequate insurance limits in place. And then, you know, more qualitatively as I mentioned there, you know, supporting management, decision making and operational efficiencies, productivity enhancements, just improving your overall business and that’s important, particularly for you know, DNO policies and excise bonds which are contingent on the financial performance of the company. So, I mean, I guess to summarize, you know, there are, you know, potential benefits in the form of both reduction in the frequency and severity of loss and aside from you know, these financial benefits and of course, the internal loss prevention, we would again stress you know, that it’s equally important that producers work with a broker that you know, understands the cannabis business, understand your operations, a software that you may have in place and and how that relates to to these different items and can obviously effectively communicate this to underwriters to you know, favorably influence their assessment risk and then I guess ultimately save you save you money on insurance which was the topic of this discussion so that’s really all we had to share on the on the insurance side I know we do have a couple polls maybe to get this get this rolling and then we’ll we encourage any questions here for for a lively Q&A session.

Rob Perry 34:30  

So excellent night thank you Kyle and Jackie and Tyler as well. Yeah, we covered a fair bit of territory you know, it’s it’s hard to get you know, the entire the entire Canadian insurance industry into 45 minutes but I think you guys did a did a pretty good job. And, Jackie, good work running through a recall and in under five minutes there. I thought I was impressive. But, but yeah, we do have a couple of polls. I’m interested in, you know, really what, you know who’s using insurance? You know, what kind of insurance are people using? So I’m going to kind of fire this first question out, while people are, are queuing up for questions, you know, do you currently use a cannabis excise duty bond? So take a look there. And, you know, see if you can see if you can get your answer, and it may not apply just ticket does not apply, if that’s the case. And as you’re going through that, also, if you have, if you have any questions, there are a couple ways to answer you can just type it into the chat. And we can read it out, one of us will answer it, or also just raise your hand, digital hand. And then I can, you know, enable your microphone and you can you can talk through the question. So I’ll just give another 15 seconds or so here for anyone to answer. But it’s looking pretty, pretty definitive. So is this, Kyle? How new of a product is this in the insurance space? 

Kyle Muscat  36:18  

Yeah, yeah. Great. Great question, Rob. I mean, a surety bond in itself is typically more prevalent within the construction space guaranteeing contracts, we start to see it with even, you know, tobacco producers on the excise side. But the excise duty regime tax regime was only introduced during legalization 2018, five years ago. So we we’ve worked closely with some of the insurance companies to develop this product. And they really aren’t widely known about. So I wouldn’t, I wouldn’t be surprised if there’s there’s very little uptake within our group. Because quite honestly, it’s it’s it’s a pretty new product, and there’s not much information out there. So yeah, it’s five years was the women’s same was first created, and with more prevalence in the last couple. Excellent.

Rob Perry  37:17  

Okay, I’ll just publish the poll here. And share the results. So everyone, and yeah, pretty, pretty close to what you’re saying. I don’t think anybody anybody does use an excise duty bond here. So it’s, yeah, from the savings you guys you guys highlighted? I mean, it’s definitely something that could free up cash flow. So would be great for large and small producers. There. We’ve got a couple of questions that have come through in the chat and the Q&A. So one of the questions here, do you guys operate or insure products? Anywhere in Africa? South Africa, in particular?

Kyle Muscat  38:09  

Yeah, yeah, that’s a great question. I guess the the answer would depend on if there’s any related Canadian entities. So we are a Canadian brokerage, the way that insurance works, you typically need to work with a brokerage, or insurance provider in your country of domicile. I mean, with the US, we’ve often seen, you know, significant US assets and those with assets in other countries like Germany, where they’re publicly traded on a Canadian stock exchange. In that sense, yes, we can insure those. But it really depends on if there’s any interest in Canada. So it’s kind of unique case-by-case basis.

Rob Perry  38:55  

Yeah, no, that’s, that is a really good question. Cuz I mean, in South Africa, you know, there’s a booming cannabis industry. It’s a little bit younger than then here in Canada, but not by much. They’re there a few years old now on the medical side, as well, as is in Europe, Latin America, Australia. We’re seeing activity there too. So yeah, there wouldn’t be a lot of interest. May I suggest Yeah, just for South Africa or any other jurisdictions? You know, please feel free to email and, you know, we can put our hands together, see if we know anyone down there that that might be might be operating in this space, so we could connect you with?

Kyle Muscat  39:40  

Yeah, yeah, I would. I guess I could jump in here to clarify like we do have global broker partners across the globe. So same thing, we’re happy to connect with a brokerage there that would have some expertise in the cannabis space. 

Rob Perry  39:56  

Perfect, perfect. And there’s another question that came through here? And it is, do you supply insurance for craft growers? So that could be? I’m assuming that’s probably also micro growers? Maybe not exclusively, but you know, under about 2100 square feet cultivation space or, you know, limitations on the production side. So yeah. What’s the package for smaller? You know, smaller facilities?

Kyle Muscat  40:29  

Yeah, that’s a great question. Short answer is yes, of course. I mean, in terms of the insurance package, you’re still typically looking, you know, at your property, your liability if, if you have the processing license, and you’re supplying direct to the provincial wholesalers, there, is that requirement for the product recall coverage? So I mean, Short answer, yes. And the, the package of insurance, of course, kind of depends on the scope of your operations, but just scaled down a bit to match your, your unique risks and needs.

Rob Perry  41:09  

Okay, perfect. So yeah, all all different sizes, and, again, helps with comes with cash flow. There’s just another poll, I’d like to I’ve got a couple of polls, that I’d like to get out, because it is a great way to gauge the audience that we have out here. So the next one is is, again, a question How prevalent is insurance in the mindset of, you know, of licensed producers? So I’ll launch this? And take, take a couple minutes to, to answer there. But yeah, I know, with all the competing priorities and facilities, you know, getting product out the door, you know, dealing with the actual production, you know, marketing, just general, you know, general commercial management of what’s going on. You know, it’s probably easy for this to fall by the wayside, or, you know, for people not to know which way to turn when they’re, they’re looking for it or really not be aware of what they should be getting. So all these questions are anonymous as well. So we won’t won’t insurance shame anybody here. Okay, so that’s been a good amount of time. So I’ll just, I’ll end the poll there. There any last-minute answers? Just get them in, in quickly? And we’ll share the results. So it seems to be Yeah, it seems to be high. It looks like a lot of groups are, you know, do you have? Do you have this top of mind is that when you find when you’re you’re talking to licensed producers? I mean, it looks like there’s a bit of a mix as well.

Kyle Muscat  43:07  

Yeah. It’s, it certainly can be high on management’s priorities, particularly closer to the insurance renewal. The price of insurance, I mean, in the cannabis space can be, you know, up to 10 times that of comparable industries, we’ve seen, you know, some operations pay, you know, insurance equivalent to, you know, 10% of their gross revenue. So, in those circumstances, it’s certainly an area that they’re looking to optimize and cost savings while ensuring adequate coverage is, is incredibly important to the success and sustainability of the operations. And then, of course, with some of the larger operations, you know, it’s it’s just something that you look at on a one to two-month horizon near the renewal. But we would certainly emphasize that insurance is a year-long kind of cycle. After the renewal, it’s, you know, we’re beginning the risk analysis looking out to new carriers, and trying to tee things up for for that subsequent renewal. 

Tyler Tisdale  44:14  

Yeah, just to jump in there. And Kyle’s point. What I found in my experience is that having done this for several years now, in the early days, it seemed like insurance was a little bit of a lower priority. As we get grants as the producer, we get closer to launching their operations. It seems like insurance was one of the last things that they have across off their list of things to get done. Now I’m finding it is far more top of mind. Producers are reaching out to us with far more advanced notice prior to beginning of their operations, so I do feel it does seem to be more top of mind now than maybe had been Historically, which course I think is a good thing, because like Kyle was alluding to, it’s certainly it’s certainly costly. And that is for sure, for the variety of reasons that we mentioned earlier in the presentation. But having gone through some claims scenarios, you know, having appropriate insurance in place is critical for the future and of the of the growers operations, as well as the short term to keep them on track and get them back on track quickly following a loss. So I’m certainly happy to see that five out of six said high priority, because that might not have been the answer we got. Had we done this three or four years ago? 

Rob Perry  45:44  

Yeah, yeah, no, absolutely. There’s there another couple good questions on there. Which, let’s, let’s seem to get to them in the next couple of minutes here, but I wanted to get out one, one more poll? Well, we have, we have time. I’m curious, you know, what people are using from a seed to sale tracking approach, you know, how are they tracking inventory? How are they doing regular regulatory reporting? You know, is there an automated recall, etc, etc. So, yeah, very high-level question here. You know, do you see the sale software? And, you know, yes, no, does not apply? You know, I would be curious, you know, what’s, what’s sort of stopping people if if they haven’t done it? Because Zacky I mean, one of the things that I always enjoy, and you use it a lot more as you’re converting groups over, but that Health Canada report, I mean, you generated it in, you know, under a minute, you know, how much time savings is there in in that automatic Health Canada generation, when, when LPS get on onto our software,

Zaki Amer  47:08  

I’ve been worked at an LP and seeing the chaos at the end of each month trying to gather all the information to fill that report out. Depending on the size of the LP takes around two to three weeks to get notes from all the different departments see what’s missing, see what doesn’t make sense. And sometimes they can’t even complete a completed before the deadline. And some of our groups are coming over, there were a lot of mistakes made as well. Having put information in the wrong columns, having reported samples incorrectly, parents immediately incorrectly, sending the cannabis 2.0, practicing Crikey. And just having that automation and making sure that human error is taken out the question is, is key for these LPs, because not only does it free up their time, but QA is time, and they can focus on more important things happening in the facility and not put that on the back burner. But they also moquette, making sure that they get correct reporting with the safety measures that we have implemented as well.

Rob Perry  48:07  

Absolutely. And from your knowledge of other groups that have come over have, you know, have they seen a similar setup and other senior sales software programs? Or is this a little unique?

Zaki Amer  48:22  

I would say ours is a bit unique. Some of our competitors, the report is half built out half, half of it needs to be completed by one of their customer success team members, which is a professional service that they add on top. So aside from us, I think there’s only another group that has the reports built out completely. But some of the other competitors, there’s half the half, half of the it’s done by the system, half is done by one of the team members. And turnaround time is almost identical to if they were to do it on by paper takes two to three weeks to be able to complete that report. So being able to submit that report on time early, getting good results with Health Canada build some brownie points goes a long way.

Rob Perry  49:06  

Yeah, no, absolutely. I’ve I’ve heard some chaos stories as well, when someone’s been responsible for doing the report for you know, two years, three years, and then you know, they suddenly move on somewhere else. And, you know, everyone sort of has to jump in and figure out their system. So it’s yeah, definitely, definitely some bumps there. Okay, let’s, let’s go from there to interesting poll. I appreciate that. Everyone to get a couple more questions in just before we wrap up here. So this is a really good one, I think, you know, in terms of priority, it looks like what’s sort of a priority of insurance that licensed producers should be thinking of getting if You know, say funds are limited or, you know, funds for insurance are limited. They had to pick kind of the top two or three. Would you have a suggestion for them?

Tyler Tisdale  50:13  

Yeah, with without classroom for sure. So, I mean, depending on where the producer is located, like we alluded to earlier, certain provinces have mandated minimum limits of product recall insurance. So it’s a must have if you want to get into the game in Ontario, and BC. Liability Insurance, of course, is critical, especially that product liability coverage, should an individual ever sustained bodily injury because of consumption of your product. For your property, and your facility, the items inside your facility, if those items are ever damaged by a fire, which historically happened quite a bit with, with, let’s call it old, older lighting techniques, if those items aren’t insured, the cost to purchase them brand new, and get your operation back online is immense. And frankly, you could you could be going out of business without those coverages in place. So if you had to have three, I mean, that would, I suppose, be my recommendation, but the directors officer areas insurance is critical as well, because your personal assets are on the line, if your director of an organization or high-ranking senior official call, maybe you want to jump in there, and I’m on?

Kyle Muscat  51:41  

Yeah, yeah, that’s a great answer there. Tyler, I think it definitely depends on the size of your operation. For the larger guys, do you know certainly, I guess the, you know, the immediate answer would be whatever’s compulsory, whatever’s required. You have a mortgage on your property, and they require you to carry the property insurance, you’re going to need it. You’re supplying to the provincial wholesalers. It’s the product recall along with that general liability, but I think as a basis, it’s that property in general liability typically offered in a package as your as your bare necessities. And then you can look to expand to you know, perhaps getting some cyber coverage, the DNO the product recall, once you’re ready to, to sell to the provincial wholesaler, so it’s really tailored to to the unique aspects of your business, but the property liability is kind of that standard baseline table stakes, so to speak. Yeah, yeah.

Rob Perry  52:39  

No, that makes sense. The I do love that. That excise bond option, because I know how, how big a challenge. Cash flow is for, you know, especially newer facilities that are coming online. And, you know, it’s a real you know, I don’t want to say lifesaver, but lifeline when dealing with that. So, no, that’s that’s definitely good. We’ve got another one here. We’re sort of running short on time. So you know, I’ll pass it on to you as well. How many insurers are there in Canada? You mentioned earlier in the the webinar that, you know, it is a limited number of of insurers for a range of different reasons. But how many options do Canadian LPS really have? 

Kyle Muscat  53:37  

Yeah, that’s a great question. I guess to attach the first part, how many insurers in Canada, there’s around 200. Then when you look at those operating within the cannabis space, it’s, you know, less than 10 closer to five, Canadian domiciled insurers that are willing to cover these risks, you can garner a bit more interest with the larger facilities and you know, some of the larger publicly traded LPS for specific coverages. But yeah, it’s a very select pool, and hence the emphasis there on you know, sometimes needing to go outside of Canada to the more creative markets overseas in London, or even going unregistered with some other carriers in the in the islands. So it is a very tight, tight market, so to speak.

Rob Perry  54:29  

And internationally, I mean, maybe you can draw some parallels to what the market looked like here four or five years ago, just because we do have some people from New jurisdictions on the line. You know, I’m assuming that were fewer insurer options four or five years ago, it was probably pretty difficult to find insurance. Is that right?

Kyle Muscat  54:55  

Yeah, absolutely correct. We’ve Seeing a couple more entrants, but it still is, you know, very slim, I think there was a lot more emphasis on going, you know, overseas or outside of Canada in those early days to find coverage. Again, and it also really has to do with those ties to the US. And the stigma around it were some of the more innovative marketplaces. I’ve thrown this name out a few times. But the Lloyd’s of London is basically comprised of, you know, 100 or so individual syndicates. And they’re, you know, nimble underwriting teams that are backed by their larger insurance companies or investors. And they have a dedicated underwriting focus within specific sectors and niche lines of business. So they would insure, you know, rocket ship rocket launchers, to you know, sports player legs, soccer player legs, those unique, obscure risks. So they’re, they’re some of the first entrants into the cannabis space. And we’re seeing that with the psychedelics, as well here in Canada. So for those of you in newer jurisdictions, that’s typically a place to look. And then it, it definitely depends on where you’re located and what the what the market looks like there.

Tyler Tisdale  56:15  

What I’ll also say for Canadian LPs, specifically, you know, as brokers we love our current insurance partners, those that work in the cannabis space, they are great. They’re very knowledgeable. They’re there when we need them. They’re there for our clients when we need them. They are great. But having said all that, we are consistently reaching out to other insurers who are not involved in the cannabis space yet, asking when they’re getting involved, is it going to be more competition down the road, for for additional avenues for finding and arranging coverage, that is certainly something that’s top of mind for us. As the cannabis industry gets more established, we’re on the mind that there will be newer players entering the market, we’ll see what happens down the road, up a finale kind of said, five, six major players, it’s very selective. And we’ll see where things go.

Rob Perry  57:10  

Excellent. And one more quick one, I just want to get under the wire, because you know, the clock’s ticking here. You know, when when groups are coming into you looking for insurance? Do they know that they should be bringing out the fact that they have a seed-to-sale system that they’ve got, you know, a GrowerIQ in there, too, you know, talking about their environmental monitoring, talking about their, you know, their recall process and that sort of thing? I mean, do you find the bringing it up? And for people on the line? You know, is it something they should bring up? Or will most insurance know to ask about this?

Tyler Tisdale 57:53  

I would say it’s something that we would certainly ask about for sure. If it’s not brought to our attention upfront, I will say there’s no question that using that kind of software. The underwriters and insurance companies will will look on that very favorably, I would expect that would result in more and more better rates for the LPS. So certainly from an insurance perspective, that can only help with cost and, and avoiding potential claims as well. 

Kyle Muscat  58:30  

Yeah, yeah, absolutely. It’s really a game of, you know, information gathering and then setting through that and presenting, you know, your opera producers operations in the most favorable light and really trying to get an understanding of their risk control strategies, which, you know, Zacky, you did a great job of showing us in those different modules, so, yeah.

Rob Perry  58:54  

Excellent. Okay. Well, thank you very much for those answers. The presentations. Gentleman, I know, we’ve got about 30 seconds here. And, you know, people have to have to get back to their day, whether they’re in Canada or, or Europe or South Africa. You know, there’s no end to the amount of work in the cannabis Lt. So, again, thank you to our presenters, and especially big thank you to our attendees. You have any other questions, feel free to reach out to any of us by email or LinkedIn. I think we’re all on there as well. You can find our contact details and just there on the presentation page and yeah, we’d be happy to, to answer them for you. Thank you very much.


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