A Brief History of Zenefits and A Crystal Ball Into the Future.

By Jeff Yaniga, Chief Revenue Officer, Maestro Health

For most of 2015, it was nearly impossible to discuss employee benefits without discussing Parker Conrad, the former CEO of Zenefits. Within a very short period of time, his company has disrupted the industry by offering FREE benefits software to small employers.

In return for this software, there was a catch: Fire your broker and instead let Zenefits earn the commission. Dozens, then hundreds, then thousands of employers did just that. Before long, Zenefits was a silicon valley sweetheart with valuations in the billions, recently securing another investment round at over $500M. The movement started on the west coast but before too long, advertising for Zenefits could be found in Chicago, Dallas, Atlanta and eventually New York City.

Last summer, a flame war erupted between Zenefits and ADP.

  • ADP blocked thousands of mutual clients from accessing their system due to security concerns.
  • Parker Conrad and Zenefits sent out a mass email some would say accused ADP of lying and accused them of being anti-small business.
  • ADP responded with a defamation lawsuit.

In September, rumors started to spread that Zenefits wasn’t meeting its revenue projections. In November, bigger problems emerged as the company started to face scrutiny about whether it was selling insurance without proper licenses.

Recently, new CEO David Sacks sent an open letter to Zenefits employees acknowledging compliance concerns and stating “Compliance is like oxygen. Without it, we die.”

So what will happen?

It’s anybody’s guess, but a few predictions seem safe:

  • The role of the broker will continue to transform.

As recently as a decade ago, the best brokers could build a moat around their existing customers with great relationship building mixed with great knowledge and experience. All of this could be done on paper, in analog format.

Now for the moat to remain as effective, brokers must layer in technology. If not mandatory in 2016, this three-pronged stool of experience, relationship building, and new technology will be 100% mandatory in the coming years.

  • Technology must intersect with service!

Uber. Netflix. Airbnb. If you ordered these services and they didn’t meet your service expectations, they wouldn’t be household names. In the benefits business, service comes in many forms. It starts with the first stakeholder: The employer. Human Resource leaders want to know their employees are taken care of. CFOs want it to bend cost curves. CEOs want all of the above. Technology is not a stand alone player. It must intersect with great service, and great service comes from know-how.

  • Compliance will be under a white hot spotlight. What about regulation?

Compliance will be under a white hot spotlight after this, as it should be. Last night, many CEOs (including my own) in the business were thankful for the enormous budget dollars they have invested in compliance staff and expertise. Many more dollars will be spent on compliance in the near future.

Say what you will about Parker Conrad, but it takes a PhD to understand the regulatory insurance environment. Each state has it’s own rules. Some argue this has huge impact on free markets. United, Anthem, Aetna and most recently Blue Cross of North Carolina announced earnings and the dramatic impact of offering ACA Individual insurance.

Eventually, this conversation will make it’s way to the presidential debates.

  • Zenefits is more dangerous than ever to brokers.

The biggest risk Zenefits faced is now out in the open. They will shrink in the short term, but their resurrection has already begun. They have already fanned the flames of the technology renaissance in benefits. If they are able to fix their compliance issues, they will remain the fox after the broker’s hen house.

Zenefits remains a call to action for brokers to embrace technology and install it professionally with their customer base.