Experts weigh in on home, auto insurance costs vs. upcoming pot legalization

Canadians could be in store for more than a new smell in the air come marijuana legalization two weeks away – they could be in store for a whole new insurance premium.

But will this insurance change be automatic on October 17th, or will it be more of a 'wait and see' scenario?

BNN Bloomberg asked insurance experts for their take on the upcoming and historic Canadian legislation and found that we might be facing some “rising home and car insurance costs … as insurers eye increased risks stemming from a potential increase in people consuming cannabis.”

CEO of comparison site Ratehub.ca, Alyssa Furtado, said that insurers are still trying to figure out cannabis consumption and the potential hazards associated with legal cannabis growth and smoking.

“We only have to look to the South for precedence on how legalization has affected the personal insurance market,” she said. “When it comes to auto insurance, [collision] rates have increased in areas where cannabis has been legalized in the U.S., and Canadian auto insurance companies are aware of this.”

An insurance industry survey in February found that Colorado had the third-highest auto insurance increases in the United States. Between 2011 and 2017, Colorado’s auto insurance premiums went up by more than 54%; marijuana was legalized in the state as of 2014.

Another expert and spokesperson for the Canadian Automobile Association (CAA), Kristine D’Arbelles, said “the insurer’s first focus is public education to prevent cannabis users from drivers.”

A recent Statistics Canada survey ahead of legalization found that “one in seven cannabis users with a driver’s license report driving within two hours of using” marijuana.

D’Arbelles also maintains that CAA has no intention of automatically changing premiums alongside cannabis legalization, however, she added that the insurance industries are watching and keeping a close eye on data and trends, opting to “adapt accordingly” over arbitrary changes.

“If accidents [increase], insurance companies’ loss-ratios will increase, and that will ultimately increase individual drivers’ premiums.”

Home insurance

CAA believes customers’ property insurance contracts “would be amended over time to cover cannabis, but there would be a maximum limit on the amount that could be paid for such claims.”

“When legal, CAA will be looking to amend its property policy wording to limit the amount that will be paid in the case of a loss,” said D’Arbelles. “CAA will be looking at an amount reasonable to the amount legally allowed to be possessed.”

As you may know, Canadians are legally allowed to grow up to four cannabis plants per household after October 17th. This potential indoor hazard could impact home insurance premiums based on an increased risk of property damage due to theft or fire “even if they’re not growing pot at the scale of a grow-op” said Furtado.

Modifications to heating, drying and electrical systems might occur, increasing the risk of fire or electrocution. Further, fumes could build up in ventilation systems causing mold or fungus damage.

Furtado did say, however, that all of this statistical analysis and risk assessment could take years to fully develop.