There are some who believe a specter is haunting our marketplace and its name is Zenefits. Zenefits purports to offer a free Web-based human resources management platform to any company that wants it.
It then attempts to use that platform to sell various HR–related products, primary among them group health benefits products. Zenefits’ CEO argues the employer-provided healthcare market is ripe for a revolution, and he intends to lead it.
The most recent development occurred April 13 when Utah Gov. Gary Herbert signed a law now being touted as a special Zenefits exception to the state’s anti-rebating regime. Specifically, the bill (Utah H.B. 141) amends Utah’s rules to allow an insurance agent, broker or consultant to provide goods or services free of charge (or for less than fair market value) provided four things are true:
- The goods or services are available on the same terms to anyone.
- Receipt is not contingent on the sale, renewal, termination or price quote of or for an insurance contract.
- There is no subsequent retroactive charge based on the occurrence or non-occurrence of an event subsequent to receipt of the goods or services.
- The recipient of the goods and services receives an oral or written disclosure before an insurance solicitation indicating their receipt is not contingent on any purchase, continuation or termination of an insurance product or on receiving a quote for an insurance product.
This expands the statutory list of insurance-related services that may be provided without running afoul of Utah’s anti-rebating rules. Any agent or broker doing business in Utah can take advantage of this.
But what is the broader impact? I can think of at least two. There is an impact on other states now grappling with how the Zenefits model comports with their anti-rebating regime. And there’s a broader long-term impact on how business is done in our sector.
Impact on the States
You can read this Utah development through two lenses. It can be a march toward the inevitable liberalizing of anti-rebating regimes in the commercial insurance sector. We champion innovation and encourage the market to develop multiple models and solutions, which are good for the consumer and should be welcomed.
Or you can read Utah’s decision as a concession, realizing current anti-rebating regimes do not allow insurance brokers to offer free and discounted goods and services, even if they make the no-strings-attached offer to the general public. The only way to authorize those activities is to change anti-rebating statutes to specifically allow them.
Regulators in most states where Zenefits operates have so far taken a hands-off approach. This is consistent with a long history of non-enforcement of the anti-rebating rules in many jurisdictions. California, the biggest market in which Zenefits has been building its customer base, repealed its anti-rebating rules years ago.
Unfortunately, as we have seen over time, a practice of regulatory non-enforcement can change abruptly and without warning.
My inbox has begun to fill up with guidance for dealing with the evolving marketplace. I would argue the Zenefits model is not revolutionary but is another in a series of efforts, going back more than two decades, that attempt to commoditize segments of our markets. There are plenty of non-producer assisted options in the marketplace for those who feel they don’t need advice. Zenefits is just the latest.
The cornerstone of the value proposition our Council members offer, however, is advice and guidance. You want and need to supplement this with products and services that make your firms financially robust. But for us the advice and guidance has become the lead draw. Many member firms distinguish themselves based on your expertise or the advisory model you offer. And you compete on that.
I do not view Zenefits as disrupting that evolution. Instead, it’s enhancing it for us, forcing us to identify our competitive advantages and to use them on behalf of our clients, who want and need the expertise and wisdom we offer. And that’s something that can’t be displaced with an algorithm.