Episode 20 | What Cannabis Operators Get Wrong About Risk | Cory Lake & Jim McErlean

Most people don’t think about insurance until something goes wrong.

At Lucky Leaf in Minneapolis, that conversation came to the forefront in a way that felt real, grounded, and necessary.

Cory Lake of World Insurance and Jim McErlean of Cannasure joined us to talk about what it actually takes to protect a cannabis business in today’s environment. Not just policies on paper, but real-world risk, real claims, and the reality operators are navigating every day.

We talked about theft being the most common claim, why cannabis businesses are held to higher standards than pharmacies, and how the lack of shared data across the industry continues to shape pricing and coverage. 

It’s also a story about growth.

As operators scale, their risks evolve. And as the industry matures, so does the need for better infrastructure, stronger partnerships, and smarter protection.

This is one of those conversations that might change how you think about building in cannabis.

Listen in.

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Transcript

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SPEAKER_00 0:01

The thoughts, views, and opinions expressed on the Canon Connect Show belong solely to the individuals and do not reflect those of Canaconnect and its affiliates, sponsors, or partners. Canticonnect does not promote or facilitate any activity that violates state or federal regulations. Everything you hear here is strictly for educational and entertainment purposes. It is not legal advice. It is not financial guidance, and it's definitely not medical direction. Seriously, don't take our word for it. Even if someone on the mic sounds like they know what they're talking about, and they're probably crazy smart too. Regardless of how legit our guests may be, you should always do your own homework, consult with your attorney, and understand the risk you're taking before you do anything when it comes to cannabis. Our intention is to keep it real. If you've got a problem with anything we've said, take us to court.

SPEAKER_01 0:51

Not fully yet, so here we go. So Canisure is a cannabis insurance group that uh Corey Lake works with closely to buy policies for his clients. World is a company that basically bought Corey and said, hey, Corey, come work with World. You can still work with Canisure, but you're gonna work under World. Now Corey's able to offer more than just cannabis insurance. It gives him more of an opportunity to serve more uh different markets and a diverse set of clientele. Yeah, and he's still doing insurance. You still call Corey Lake, but now you might uh reply to a world insurance email instead of a Lake Group insurance email. Yeah, but nothing's changed. More, nothing but good things are coming. Corey Lake will be around all weekend, so yes. You can't miss that face. You gotta find a guy. Corey Lake for life. Insurance. Insurance. Welcome back to the Canna Connect Show. I'm your host, Stephen Eigaman. We are live from Lucky Leaf. It is Friday afternoon. We're gearing up for an incredible weekend. I'm joined by Corey Lake of Lake Group Insurance and World Insurance Associates, as well as Jim McErlene with Canisure. Together, these two do a lot of business. They help insure folks like you in the cannabis industry. How did you guys meet? Where, where, how far back does it go?

SPEAKER_02 2:09

I stalked Corey while he was stalking me. Yeah. I know I did a presentation in Minnesota. I was remote, sitting in my living room in Hermosa Beach, California. And it was a class for insurance agents on cannabis. So I had to have a legitimate non-commercial uh discussion on cannabis insurance, the industry at large for both insurance and cannabis, kind of merged those two things together. And apparently he was sitting in the room without my knowledge, an agent. I got an idea of who was in attendance because I was remote. And I'm like, Corey Lake, I've seen that guy's name and other things. So it was a mutual who's gonna make the first move. We've been dating ever since.

SPEAKER_01 2:52

And what did you like about Canisure uh in relation to the rest of them industry market?

SPEAKER_03 2:58

Well, their policy language. I mean, that's really the kind of the takeaway from all of the stuff that I've researched over the years. Yeah, policy language is the best in the industry. Great. Um you guys were not first in.

SPEAKER_02 3:12

Were you second in as far as I know you're yeah, I think like your second longest tenured cannabis insurance provider. Okay. And we became a risk taker in 2017. I've been at it for quite a while.

SPEAKER_01 3:25

Yeah. And I mean, it in insurance policies that don't actually meet what you're doing are not good policies. They're they're a waste of money, right? It's important that you have a policy that matches the risk that you're taking.

SPEAKER_03 3:40

I mean, yes.

SPEAKER_01 3:41

I mean, it's obvious, right?

SPEAKER_03 3:42

But it's worth saying that it you it is there needing to be alignment. And not all policies are equal at the end of the day. Uh, you know, every single one is going to be nuanced. We will find different things fit in different places, but canisure, the one thing that we find universal is that everybody uses the Canisure app.

SPEAKER_01 4:01

Yeah.

SPEAKER_03 4:02

Yeah. So, well, no, the applications of when I send an application out, we send the canisher application out for somebody to fill out. And if we present to a different insurance company, they accept their app.

SPEAKER_02 4:14

Interesting. It's like the USI. It is like the US. Yeah, that kind of poll, Stephen. Yeah. But the one thing's important to understand with Corey is as an independent agent, he has multiple carrier solutions at his fingertips. We may be the best on a host of mechanics operators in the state of Minnesota, yeah, but the few that we don't, or even the transporters, as an example, or coverages like cargo or commercial auto, we don't play in that marketplace, but Corey does. So while we have this awesome partnership, his independent agency world allows him to help all of the insurance needs in the industry.

SPEAKER_01 4:54

Right. So working with Canisure is a choice. 100%. It's not a mandate. Uh, you're not obligated necessarily, but you find that Canisure, and I'm am I using the right terminology, Canisure policies are some of the best policies out there for cannabis entrepreneurs. Absolutely. And and and world insurance tends to agree. It's world. Tell me a little bit about how world interfaces with Canisure.

SPEAKER_02 5:20

Yeah, so interestingly, one of our largest customers, insurance agent customers, Corey's customers are the operators, right? My customers are insurance agents. So one of our largest ones in the state of Washington recently sold his agency into World. So we had this great relationship fryer. Oh, yeah. We had known some of the leaders at World Insurance out east in New Jersey and Massachusetts. And as we were all having this conversation, what's happening in Minnesota? Corey was wise enough to say those resources in the cannabis space are going to help me and my clients in the state of Minnesota make sense. And so they joined forces. World has been at this for you know upwards of seven years themselves. Right. So they're as OG in the cannabis insurance industry as Corey is to the Minnesota cannabis industry.

SPEAKER_01 6:10

So that so what else? I mean, we don't have to talk about all of it, but what are some of the other similarities or uh like-mindedness that you found in having conversations with world in this and getting to a place where you're saying, hey, I'm I'm ready for a new home?

SPEAKER_03 6:28

Yeah. Well, a lot of it was size, is a big part. As companies start to grow, you need to have infrastructure to be able to help those clients. Yeah. Especially when we get into groups that are 20 people, 25, 50 people, right? All of a sudden those bodies start to make a big difference. And you have to have a team that understands how to grow companies to scale.

SPEAKER_01 6:51

Your clients are starting to grow.

SPEAKER_03 6:53

Correct. Literally, figuratively. Literally and figuratively. It is uh, and that is going to be a big part about being able to stay on top of those, yeah, and then to be able to consistently help them as they grow into much larger organizations. I see, I see.

SPEAKER_01 7:08

And that makes a lot of sense because as your clients grow, you want to grow with them. Absolutely. You don't want to be caught up in the in a in the in the snowball, you know, you like overwhelmed.

SPEAKER_03 7:19

Well, you get overwhelmed, but then you just can't help people anymore. Here, all of a sudden, your service starts to supper. The clients are going to be able to feel that. Yeah. You know, you get into let's say you've got five stores, and for a lot of small agencies, that's just too much to manage. And you have people on the back end that need to help manage those things and the ever-changing and evolution of how those businesses run. Yeah. So in between creating certificates for people or doing, you know, just taking in the money or figuring out different LLCs, yeah. If you do not have the infrastructure to do it, you're what's going on in the IMU? You don't want to know.

SPEAKER_01 7:58

I don't want to. That's awesome. Jim, how different is cannabis insurance from car insurance, regular insurance?

SPEAKER_02 8:08

Markedly different because you have to have language specific for the industry. So we actually created a number of endorsements that had to speak to cannabis and and people like the bud tenders, as we call them by nickname, because they provide advice at the dispensary. And so you have to recognize that that professional liability exposure exists in this marketplace. It doesn't exist at a 7-Eleven, for example. Right.

SPEAKER_01 8:35

Yes. Okay. So if I'm going to pick on the cash register at 7 Eleven, they're going to deal me a pack of skull, they're going to deal me a pack of Marlboro's. They're going to deal me a Zinn.

SPEAKER_02 8:46

Gas station insurance is not as uh regulated as cannabis insurance, or it's not, but the reality is you're choosing to buy products that you probably have an idea, and you're not asking the clerk for his or her advice that you want the Zinn, the marble pack, or whatever. When you go to a dispensary, you often are asking the staff, I have pain seeking what product you think I should buy for my knee pain. And what happens if that knee pain was misdiagnosed by the bud tender because the person actually had a headache and they now overused, let's say, their product, yeah, and they blamed it on the bud tender for the bad device because my knee pain didn't go away because I had a headache. And that silly example is a legitimate professional liability exposure, of which we have to draft language, because you have to protect the dispensary for dispensing knowledge, not just dispensing products.

SPEAKER_01 9:38

And as you and I talk about often, there is a lot more data on the tobacco and alcohol side of the sin industry than what we have available to us on both hemp and the cannabis industry. And so when it comes to insurance and risk tolerance and things like that, there's a lot more understood with tobacco than what we're talking about with the plant, the cannabis plant. Absolutely. Okay. So and that get that goes into how you how expensive policies are, how much risk insurance agents or not into policies are are willing to well and it gets into the claims handling as claims.

SPEAKER_03 10:14

And so claims are a big, big part of how the market or how pricing is dictated. Uh, if we know, I love the use like the Honda Civic. Okay, you know, you take a Honda Civic, we know how many of those are going to be manufactured, yep. We know how many of them are gonna be sold. Okay, we know on average how many of those are gonna have car accidents throughout the year, and we can do that on a global scale. So all of a sudden, it's like we know that a Honda Civic in Minnesota, in the in Minneapolis, this is about how much it's gonna cost. And they can that it's dynamic, yeah. So they use a lot of dynamic price and growth tourist stuff, but that's what we're missing in the Canada space because we want national or global averages on what the claims are, how much they cost, what they look like, to be able to drive the cost to where they need to be.

SPEAKER_01 11:08

Is there aggregation happening on the at a with the state-by-state market as we have it now? Is there a way to to bulk understand the national market? Because there is not a federally legal cannabis market as a just medical.

SPEAKER_02 11:23

Right. Nope. And that's not enough. But the claims data doesn't exist because we all have that as proprietary. So Canisure has our claims data. Um, our competitors have their claims data, and no one's gonna look to share that information. So having the ability to price the industry based on its own data is very difficult. But now we've got five to seven years that is now becoming more credible. Good. And so at a certain point, we'll all start pricing the industry for what it is, not what assumptions were made. Okay. And you have to understand there's a chain of command that goes from our underwriting team to our carrier partner team to the reinsurance team, and everyone makes assumptions. Now we're starting to do those discussions based on our own data, but that doesn't mean we know the data from our competitors. I see. So it's still kind of a trap sheet.

SPEAKER_03 12:16

Yeah, and I would say the greatest example is that on-premise consumption. I mean, Minnesota, you know, that's something.

SPEAKER_01 12:21

Yeah, let's talk about Minnesota.

SPEAKER_03 12:22

Yeah. I mean, that's that's the big one for us, is that on-premise consumption piece. And those prices have been excessive. But no, like we talked about it before. Nobody wants to be first on that claim. Was that clean that's gonna be big? More than likely. Uh, you know, it's gonna be a car accident, somebody's gonna get injured, and then that's gonna go to courts, and somebody's gonna have to fight that for a long time to figure out where that lands. I see. Um, so they've gotta be they've gotta price that in a way that makes sense. Risk reward. Of course.

SPEAKER_01 12:59

Inside dispensaries, how much uh how much how prevalent is theft? Is that something that you guys look into with insurance?

SPEAKER_02 13:08

It's our number one active claim. So let's say there's a hundred claims that occur across the industry. Yeah, theft is easily 70% of those, so it's a huge number. Thankfully, they don't amount to a whole lot. Yeah, and a great example here in Minnesota, we happen to go to Island Pesci. Sure, stop by the dispensary, yeah. It is guarded by little soldiers, the little bollards is what they call them, I believe. Yeah, but there's 20 surrounding both sides. Yeah, a car cannot drive into that, yes, but that's what is happening in other places. So Minnesota is actually at least that location ahead of a stein, okay, ahead of speed, which is awesome. But you're seeing a lot of vehicles driving into a building to open up the doors in which to steal product.

SPEAKER_01 14:00

Bang, bang. Happens all the time. We're not talking about a gummy pack here and a gummy pack here. We're talking about forcefully entering because it's a cash-based business, so they're coming for the cash, they're coming for the vaults, or they're or there's a black market, so they can take that product in. Yeah, yeah. Smells like somebody's got something to go down.

SPEAKER_03 14:20

Yeah, you know, we we talk about the ballards, which are the giant concrete things, but something you can do is call the city and say, hey, we need a bike rack out front. Yeah. And you may be able to find deterrence, and all we're looking for is a deterrent. Yes. We we need to slow down the feats, okay. So sure, that could be a tree, that could be a bike rack, that could be concrete blocks, whatever it is, but anything you can do to slow it down so the police can get there before they actually get to the uh any of the products.

SPEAKER_01 14:51

How much how has your creativity evolved in this cannabis industry career, cannabis insurance industry career? Because what I'm hearing is like I'm thinking of you playing The Sims, and oh, I'm gonna click and drag a tree. Oh, all right, my insurance policy is gonna be a little bit better now. Oh, I'm gonna pull a bike rack. How creative this is this is insurance, but yes, yes, insurance, but very creative in how you approach to serve your clientele, yeah. Serve your customers.

SPEAKER_03 15:24

Well, it's the greatest part about this is that it's unlike any other type of insurance. The closest thing that I can relate it to is cyber insurance when that first came out, which is probably 15 years ago, something like that. So it's dynamic. We're seeing new products come out all the time. Yeah, these guys are constantly changing, you know, trying to do better work to help clients become more efficient and effective. Cool. Uh, as we see claims, adjusting uh policy language, that sort of stuff. Yeah. So it's it's a creative space. We're not bored. I mean, it's ever and we're dealing with because we both deal nationally, we get to deal with every single state. Yeah, and it's like as soon as you've got one down, you've got something else that pops up somewhere else, and you're like, oh my gosh, a new rule, a new regulation. How do we deal with that?

SPEAKER_01 16:17

Uh what other states pique your interest or actually take up some of your time?

SPEAKER_03 16:22

Oh, the ones that are I'm really interested in is Georgia. Yeah, okay, and Texas. I think Texas is in those are hem states. They're hem states, and I think they're gonna be big recreational markets.

SPEAKER_01 16:36

I was talking to Comcast Business earlier, and I I shared the we've we've we've crossed, we've crossed the breaking, or what's that the marketing term? Is we're we're past the the tipping point, right? Now we have we now have more adult use. It's about 50-50. We've got 41 medical states. The tipping point has happened, and it's only a matter of time before Atlanta or Texas, uh Georgia and Texas become adult use states. But man, are there some folks that just don't want anything to do with marijuana still in 2026?

SPEAKER_02 17:11

Yes, there's still a little of that you can make a political assumption. Yep. The the red states seemingly don't, Bible belt states seemingly don't, but yet Alabama and Mississippi have both lodged into the medical world. Right. And obviously, we know the plant does have very potent medical applications. It does.

SPEAKER_01 17:28

Yeah.

SPEAKER_02 17:29

So I think just in reality, it's going to continue on in a very good way. Some states will say no to recreational, you know, that whole red versus blue state story. But at least if we get the medical piece, it's still going to be good for our collective industry.

SPEAKER_01 17:43

You're right. Now, every medical program and every adult use program is different. That's one of the most challenging parts about companies growing, right? Because they have to do it state by state, and you've got to set up new operations, abide by different laws. I would love to see schedule three take place. I would love to see safer banking take place. I would love to see some of these things that would even the playing field across the country. Yeah. And obviously everyone here would have to, not everyone, but a fair majority would.

SPEAKER_03 18:14

Well, I think it's a that's a great sort of segue to a question. What does schedule three mean for camishure?

SPEAKER_02 18:22

It doesn't mean a lot because the banking piece is a much stronger component to changing the industry. Schedule three just means that there's that more of a medical component to it. So the regulation continues for us, which is important as an insurance provider, because we're obviously accepting risk. The lessened risk, the better, and we rely on the regulations, which is why we love a state like Minnesota, who has just written their laws recently with knowledge. You know, they followed a couple of states that had solid, you know, Massachusetts being a great state, Illinois being a great state, that require enough depth to get to that license because they had to jump through a few thresholds and barriers that make it hard to mess up the product, all the testing, right? All the different points of chain of command. Yeah. And it was Lori and I were talking though.

SPEAKER_01 19:21

If you if you're listening, because we know you are, like it's cannabis goes through more stringent testing than our than our food does. And that and that's really tough because the food industry is so built out, the farming industry, the the corn and soy in in Minnesota, like yes, I know it's bit it's David and Goliath, but like you've got these micro businesses that are held to such stringent testing, yeah. And and and it's it's just really hard. And I'm not appealing to you to say, oh, it's so hard. Like there is so much risk in getting into the cannabis industry. I don't think we can belabor that point enough. No, right.

SPEAKER_03 19:59

I've got a fun story. So, right when we started getting our first security stuff that was coming out, the OCM drops all their security measures. One of the first phone calls that I made was to a gentleman that start runs pharmaceutical. Um, and he does it for you know our statewide share. And I was like, tell me about your security measures. What do you guys have to do in pharmacy that you know I can kind of learn something from? And literally the first thing he says is Corey, we don't we don't deal in Schedule One drugs, it's not even close. Yeah, we have a couple of cameras and it's safe.

SPEAKER_01 20:39

And our night touching heroin, right? Right, yeah.

SPEAKER_03 20:42

I mean, it's so I'm like, oh my gosh, we are held to a higher standard than any of the pharmacies that are out there that are giving out medications to people. That's that's kind of mind-blowing. It was kind of mind-blowing. Hey, conversation ended pretty quick. Like, oh, okay.

SPEAKER_02 21:03

There's a little bit of chain command in the narcotics space, but not in terms of how stringent the cannabis industry is held to the different security measures. You think it could be spec identical and it's not right, absolutely.

SPEAKER_03 21:16

You would think that would be sort of the level that they would look at and go, okay, if the pharmacies are doing this, then that should be good enough for us.

SPEAKER_01 21:25

But so on one hand, I hear you. It will schedule one won't change that much. But down this down the the closer we get to the plant, the less restrictions we would see, the less uh extremely overbearing compliance measures we would.

SPEAKER_02 21:43

Oh, I love that it would all do things off schedule three or reschedule. Right, right. Because it allows the business to be operating as a business. Right now it's operating almost like, you know, with one hand tied behind your back, and that you're still a criminal. Yeah, that's obviously not the case at all. This is a billions of dollar industry. Right. That needs some of the benefits of the IRS tax code, right? Of which we all know 280E. We want to see Schedule 3 pass. Yeah. Or get implemented. Right. Because we want the margins of the business to be stronger. We want the financial backdrops of these companies to be healthy.

unknown 22:19

Yes.

SPEAKER_02 22:19

And that only a better insurance risk for us. And so we're really supportive of the movement to schedule three. That makes sense.

SPEAKER_01 22:27

So we hope that happens sooner than later. Great, great. Uh Gorey, what else are you hoping that happens sooner than later as it relates to the Minnesota cannabis industry?

SPEAKER_03 22:37

Just excited for us to get off the ground. Yeah. You know, at the end of the day, all the the uh these people screaming from the balcony are need flour. Yeah. And that's we need more flour. And the thing that I'm most excited about is I think six months from now, the landscape is going to be completely different. And we're seeing more people get into the space, which is also very exciting. Great. I mean, it's we've had so many fits and starts that finally it's like we're we're seeing the motion forward. Yes. And I think people are starting to get in the groove a little bit. Stores that are open are getting some product, they're starting to feel better about it, but we need more products. Yes, whatever. And we need testing facilities. But yeah, that's what I'm excited for. It's to start seeing the stuff move forward.

SPEAKER_01 23:30

Amazing. Uh, if folks want to get in touch, where should we where should they reach out?

SPEAKER_03 23:36

Yeah, well, you can use my old email address. All right, still works. Yeah, it still works. C Lake at lake groupinsurance.com. Great. And then it's also Cory Lake at worldinsurers.com.

SPEAKER_01 23:46

And if you search Coreylake, you're bound to find either a Can of Connect interview or a website. And uh, I mean, I can't let you guys leave without saying thank you for your support for this event today as well as tonight. Um excited. We've got to WaGu empanadas, Wayu mini burgers, Wayu meatballs. We got beef tartare on the menu. I can't wait. Uh we'll be it'll be a matter of time. Weed and Wagyu, we're bringing it together. We couldn't do it without you. Yeah, thank you, and it's great to see you guys.

SPEAKER_02 24:18

Thank you, Steve. We appreciate everything Canaconnect does for the injury. No doubt our pleasure.

SPEAKER_01 24:22

Cool. All right, well, that's all for today. If you want to check out Corey Lake, make sure to give him a search, check out Jim McEarling both on LinkedIn, and we'll see you tonight at the CannaConnect after party.

SPEAKER_02 24:33

Peace.