June 2018

Will Legalization of Marijuana Affect Automobile Insurance?

By Anthony Cappelletti

There is no question that marijuana contains chemicals that can impair one’s motor skills and judgement. For this reason, marijuana has historically been a controlled substance in North America. Laws made it illegal to possess or use marijuana. But the impairment properties of marijuana have been considered by some to be comparable to the impairment properties of alcohol, which is a legal substance. However, attitudes about marijuana have changed over time and there has been a push for the legalization of marijuana.

In 1996, the state of California legalized marijuana for medicinal use. Now, more than half of the states in the U.S. and the country of Canada have legalized marijuana for medicinal use (i.e., prescribed by a medical doctor). The push for legalization did not end with medical use. In 2012, the states of Colorado and Washington became the first to legalize marijuana for recreational use. There are now nine states that have passed legislation to legalize marijuana for recreational use. The government of Canada is currently in the process of passing legislation to legalize marijuana for recreational use. Because of these developments, there is a chance that there could be a greater number of impaired drivers on the road, leading to increased claim costs for automobile insurers.

Before continuing, I would like to note that it is in society’s best interest to reduce impaired driving—from any source. Impairment while operating a motor vehicle contributes to an increased frequency of accidents, injury and death. In this article, I will first look at impaired driving from alcohol and then make some comparisons to impaired driving from marijuana. I will then review some of the statistics relating automobile accidents to the increased accessibility of marijuana and how this might affect automobile insurers and their policyholders.

In the past, impaired driving usually implied driving under the influence of alcohol. Alcohol is legal and accessible. The level of alcohol in one’s blood stream correlates to the level of impairment. With enough consumption, alcohol will significantly impair one’s cognitive and physical abilities. Driving under the influence (DUI) of alcohol is a major concern to all. Laws have been passed to make the penalties strong for DUI. There has also been a trend to reduce the blood alcohol threshold for declaring a driver to be impaired. But DUI penalties on their own are not enough. Punishing an impaired driver after the fact sends a message, but does not do enough to discourage impaired driving. Law enforcement developed methods to remove and punish impaired drivers before they are involved in an accident. Examples are the power to pull over drivers they suspect of being impaired, and to perform random roadside checks without probable cause.

Before the widespread use of breathalyzers, law enforcement relied on observational roadside tests to determine if a driver was impaired. These observational tests were not always successful if challenged in the courts because they are subjective and not consistently reliable. Law enforcement needed something that was more objective that could withstand challenges in the courts. A blood test would work except for the fact that it is a costly, time-consuming and invasive procedure to conduct a roadside blood test. The breathalyzer changed this. A breathalyzer can measure one’s blood alcohol level from a relatively inexpensive, quick, non-invasive test of alcohol in a breath sample. The results are objective and accepted as evidence in courts. In many jurisdictions, law enforcement has been given the power to randomly stop vehicles without cause to test drivers for impairment using a breathalyzer. The result of this is that there are tools in place to reduce impaired driving from the use of alcohol. This is not to stay that it is no longer a problem. There are still people who drink alcohol and then drive impaired. These drivers tend to be involved in a greater number of accidents. The tools in place can only reduce the numbers on the road, not eliminate them.

Marijuana is the common name given for the cannabis plant or the preparation from the cannabis plant for its use as a drug. Marijuana has impairment qualities. Intoxication from marijuana is associated with a “high” that includes feelings of relaxation, impairment of perception (judgment and time) and impairment of motor skills. 1 Marijuana includes a number of natural chemicals including cannabidiol (CBD) and tetrahydrocannabinol (THC). CBD is considered to be the source of marijuana’s therapeutic benefits (e.g., pain relief and anti-anxiety properties) and THC is recognized as the psychoactive ingredient in marijuana that is responsible for impairment. While the impairment qualities of marijuana for judgment and motor skills can be compared to those from alcohol, there are some notable differences.

  • Alcohol is sold at set strengths noted on the product label so that consumers know how much alcohol they drink in a certain time frame; marijuana “strength” is not standardized and intake methods are variable (either by smoke inhalation or through consumption of edibles). Furthermore, there are many factors that can influence how much THC enters the body (e.g., for inhalation one may consider buds vs leaves vs oil, “joint” vs pipe vs heated oil diffuser, amount of product in preparation, whether or not the preparation is shared with others, amount of ventilation, inhalation technique). This makes it extremely difficult for one to gauge how much THC has entered their body.
  • The effects of alcohol consumption wear off in a somewhat predictable pattern; the effects of marijuana intake do not wear off as predictably (this may relate to the fact of not actually knowing how much THC has entered the bloodstream).
  • A person must directly ingest alcohol to be impaired; a person may become impaired by breathing in second hand marijuana smoke.
  • The amount of alcohol in one’s blood is a relatively good gauge as to how impaired an individual is; the amount of THC in one’s blood is not necessarily a good measure of impairment. 2
  • Alcohol does not remain in the blood for long periods as it is broken down by the body relatively quickly; THC from marijuana can remain detectable in the blood for many days after the person is no longer impaired. 3
  • A breathalyzer can be used by law enforcement as a quick and objective field sobriety test of alcohol in the bloodstream; there is no quick and objective field sobriety test of THC in the bloodstream, field sobriety tests for marijuana impairment are currently observational, conducted by those trained in drug impairment recognition. 4

The differences noted above will limit the effectiveness of law enforcement in reducing driving while impaired from marijuana. They create challenges for law enforcement beyond those they face for reducing driving while impaired from alcohol. What this means is that as marijuana use becomes more accessible and more socially acceptable, we could see more impaired drivers on the roads.

The Insurance Institute for Highway Safety (IIHS) recently published a paper on marijuana use and driving titled, “ Marijuana use and Driving in Washington State: Opinions and Behaviors Before and After Implementation of Retail Sales.” The most interesting finding in the report was that the “prevalence of daytime THC-positive drivers increased substantially a few months after retail sales of marijuana were legal.”

In 2017, the Highway Loss Data Institute (HLDI) produced a report on “ Recreational Marijuana and Collision Claim Frequencies.” The states of Colorado, Washington and Oregon permitted sales of legalized recreational marijuana in 2014/2015. In its report, the HLDI examined collision claim frequencies in these states relative to nearby states. This comparison showed frequencies 4.5 percent to 13.9 percent higher in the states with legalized recreational marijuana. The HLDI report then examined these three states against states where the claim frequencies were highly correlated before the legalization of recreational marijuana. The report noted that “the legalization of retail sales was associated with a 2.7 percent increase in collision claim frequencies.” This increase is averaged across the three states examined. Of the three states, the increase was largest for Colorado, the state in which legalized recreational marijuana has been available the longest. It should be pointed out that this study was correlational. There was no attempt to determine if impairment from marijuana was the specific cause of any accident.    

In August of 2017, David Migoya of the Denver Post wrote the investigative article “ Exclusive: Traffic Fatalities Linked to Marijuana are up Sharply in Colorado. Is Legalization to Blame?” The article summarized the results of the Denver Post’s analysis of road safety after the legalization of marijuana in Colorado. Migoya noted that the “number of drivers involved in fatal crashes in Colorado who tested positive for marijuana has risen sharply each year since 2013, more than doubling in that time.” This increase in fatalities does not necessarily directly link to the legalization of recreational marijuana. However, it does provide another piece of information to consider.

In the book Forensic Science and Medicine: Marijuana and the Cannabinoids5, Chapter 12 reviewed “Marijuana and Driving Impairment.” This chapter includes the following statements: “Driving is a complex task requiring the integration of various cognitive and psychomotor skills. … Laboratory studies have shown that cannabis users lose the perceptual ability to identify simple geometric figures within more complex patterns when intoxicated. Such perceptual changes can influence a person’s normal driving behavior in a potentially unsafe way. … Driving is a divided-attention task … laboratory assessments of divided and sustained attention performance … show consistently that the greater the demands on cognitive processing ability, the more complex the tasks, and the more tasks to be attended to, the poorer marijuana-dosed subjects performed.” The chapter then reviews several studies that have been conducted to determine if there is a link between marijuana use and collision frequency. Considering the results from all of these studies, there is a link between marijuana use and increased collision frequency. The risk is more significant when combined with alcohol.

There is little question that marijuana use can cause impairment and impairment increases the likelihood of accidents. Many studies have been conducted that show this to be the case. In 2017, the National Academies of Sciences, Engineering, and Medicine published a report on the health effects from marijuana. This report included many conclusions. One of the conclusions related to driving under the influence of marijuana. The report concluded: “Cannabis use prior to driving increases the risk of being involved in a motor vehicle accident.” The fact is, most people that use it recreationally, do so to feel “high.” So, what does all of this mean for automobile insurers and their policyholders? Automobile insurers should pay close attention to claim trends in areas with accessible legalized marijuana. It is likely that these areas will show increasing claim costs (relative to other areas) and rates should be revised to reflect it. This will mean policyholders in these areas will likely pay more for their automobile insurance.

Road safety is important to all, not just automobile insurers and their policyholders. More research needs to be done to develop a quick, reliable and objective field sobriety test for marijuana. Having such a test, law enforcement can then set up random, objective field sobriety tests that will deter driving while under the influence of marijuana. More research needs to be done on determining how much THC and other cannabinoids in the blood indicates impairment. Current laws need a sound scientific basis for determining the amounts of chemicals in a person to indicate intoxication. Finally, areas with legalized recreational marijuana need to educate the public on the dangers of driving while under the influence of marijuana and especially the dangers of combining marijuana use with alcohol. While this is already being done to an extent, an argument could be made that these educational efforts need to be increased.

While it is true that recreational marijuana has only been legalized in nine states, the numbers could increase quickly. Furthermore, over half of the states and the country of Canada have legalized medicinal marijuana. The regulation of legalized medicinal marijuana varies across the U.S. and Canada. There are jurisdictions with legalized medicinal marijuana (where recreational marijuana is illegal) in which medical access is more liberal: medical marijuana shops set up a storefront/clinic with a medical doctor on staff who writes marijuana prescriptions on the spot for those complaining of pain or anxiety. These jurisdictions could also show increasing claims frequency for automobile insurance.

My focus in this article was to examine how increased accessibility of marijuana may affect automobile insurers. But there are other ways that the increased accessibility of marijuana may affect the general insurance industry. One is that of policy disputes. While the business of marijuana may be legal in many states, it is still federally illegal (i.e., it is a Schedule 1 controlled substance under federal law in the United States). If a marijuana business has a commercial insurance policy and suffers a loss, it may become involved in a policy dispute trying to recover for any loss to the marijuana product or equipment used to produce it. This is because an insurance contract may not protect violations of the law. Possession and use of marijuana violates federal law—claims could be denied using this reasoning despite it being legal in a state. Also, given the fact that marijuana is federally illegal and that banks must comply with federal laws, most marijuana businesses do not have bank accounts and mainly conduct business with cash. Even if coverage is not in dispute, insurers will need to consider the fact that marijuana businesses tend to be a target of criminals that are after both marijuana and cash.

Another way that the increased accessibility of marijuana may affect the general insurance industry is in general liability and employer’s liability claims costs. Employers need to ensure that their staff is fit to perform their tasks. They may be liable for damage or injury caused by employees under the influence. Also, companies and individuals hosting parties where marijuana is accessible may be liable if an intoxicated guest gets injured, injures someone or damages property. These are just a couple of examples.

Much is changing in North America with respect to marijuana and its accessibility. General insurers need to be aware of the potential effect on the business of insurance. Potentially rising automobile insurance claim costs is just one of the issues for general insurers to consider.

Anthony Cappelletti, FSA, FCIA, FCAS, is a staff fellow for the SOA. He can be contacted at acappelletti@soa.org.

1 The health effects of cannabis and cannabinoids: Current state of evidence and recommendations for research, National Academies of Sciences, Engineering, and Medicine (2017). Washington, DC: The National Academies Press.

2 Even though there is a question of how much THC is enough to represent impairment, many state laws do specify an amount. For example, the state of Colorado specifies that anyone driving with five or more nanograms of THC in their blood can be prosecuted for DUI.

3Studies have shown that long-term users build up stores of THC in their blood. These stores can measure over five nanograms many days after any use even though they are not impaired.

4Currently, roadside tests for impairment by substances other than alcohol must be conducted using subjective observational tests. Jurisdictions with legalized marijuana have generally given law enforcement increased training in roadside detection of impairment. These jurisdictions also include provisions for blood tests upon a suspected DUI from drugs. The state of Colorado can revoke driving privileges for anyone refusing to comply with chemical testing whether or not there is a criminal conviction.

5 Forensic Science and Medicine: Marijuana and the Cannabinoids, Edited by Mahmoud A. ElSohly, PhD, The School of Pharmacy, The University of Mississippi,  published by Humana Press Inc., ©2007. Chapter 12 was authored by Barry K. Logan.

6 It should be noted that there are some studies that show that marijuana use does not increase the frequency of automobile collisions. For a review of past studies, I recommend the following article: Sewell, R. A., Poling, J., & Sofuoglu, M. (2009) “The Effect of Cannabis Compared with Alcohol on Driving,” The American Journal on Addictions / American Academy of Psychiatrists in Alcoholism and Addictions, 18(3), 185–193.

7 The health effects of cannabis and cannabinoids: Current state of evidence and recommendations for research, National Academies of Sciences, Engineering, and Medicine (2017). Washington, DC: The National Academies Press.