Legalising marijuana – how will it impact insurance?

With marijuana being legalised in South Africa, many industries have had to consider the implications of this decision on their businesses, and consequently, their clients. 

The insurance industry forms part of this group. We have a look at how car and life insurance will be impacted by this change in legislation. 

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Insurance considerations for marijuana

If you habitually consume marijuana, insurers might consider you a higher risk, which may increase your premiums. However, this has not been settled yet, as insurers are still assessing the impact of the situation. So far, some considerations are clear. 

1. Car insurance: An accident under the influence

Caron Whitfield, head of distribution and marketing at the Apio Group, says that most policies state that if the driver is found to be under the influence of intoxicating liquor or drugs, the claim will be rejected.

This means that your claim may be rejected if it was proven that you had consumed marijuana. This can be done by taking a drug test at the time of the accident, and police may be suspicious if they find marijuana in your vehicle.

According to David Roache, CEO of Dotsure, different insurers will treat these cases differently. He believes that it all depends on what is outlined in your policy.

“Some insurers may choose to decline a motor claim as a result of the driver being under the influence of prescribed medication – let alone marijuana. In general, for safety’s sake, it’s best to err on the side of caution as far as this specific issue is concerned,” says Roache.

READ MORE: Does car insurance have a waiting period?

2. Life insurance: Potential higher risk to insurer

Similarly, there is still a lot of debate about the long-term consequences of smoking marijuana. Some believe it’s harmless, while others are convinced it leads to critical health issues.

In a press release, Hugo du Preez, manager of technical operations at PPS Short-Term Insurance, says that evidence is still inconclusive regarding the health risks and potential benefits of smoking marijuana.

“On one hand, no deaths have been reported due to acute marijuana poisoning, and no studies have clearly documented increased mortality from the use of the drug,” says Du Preez.

“On the other hand, there's no consensus among qualified experts that marijuana is safe and effective for use in treating a specific, recognised disorder. Further studies will be necessary to reach a definitive conclusion on the long-term health and mortality impacts of marijuana consumption.”  

As a result, Du Preez says that the insurance industry must carefully consider the underwriting implications of more widespread marijuana use.

“The key underwriting considerations will include the frequency, purpose, and admission of use, as well as the type of marijuana used, the applicant’s age, history of accidents, risky behaviour, and other substance abuse,” says Du Preez.

“Some companies are considering offering non-smoker rates to the occasional marijuana user who does not smoke or combine tobacco or nicotine products. But this remains a challenge,” he explains.

Du Preez says that even with studies supporting underwriting changes, there may be trade-offs. This may include price increases.

Roache believes that not much will change in the short run. “Insurers will probably find a way to hedge against additional risks if they start to see new trends as a result of legalisation. But there are still too many unknowns to make any specific predictions.”

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