If anyone is thinking that this month's Zenefits compliance debacle is of the "I told you so kind," it's time to think again. While "The All-In-One HR Platform"—which is paid through insurance commissions—struggles with leadership, lack of insurance expertise, licensing, and culture issues, to name a few...a swell of consumer support for its platform begins to mount.
Not every consumer sees the advocacy value of their health insurance broker. And when they don't, often what they see is a broker being guaranteed a payment of 5%-7% of their premiums, by law, for doing nothing. So in comes Zenefits offering to use some of that 5%-7% to pay for a software platform that handles HR onboarding, benefits administration, gives them competitive advantages, and save hours of administration time each month.
Consumer reaction...well, as the CEO of Fireclay, a California tile manufacturer and retailer put it in a recent LinkedIn post: "Zenefits' vision, when I first heard of it, sounded AWESOME - one of those "why didn't I think of that!" kind of awesome. Instead of simply taking the profit mentioned above and going to hit the links, (Zenefits) said why not take that money and create a software platform that would enable small to medium size businesses to have better people and benefits solutions, similar to what most other large organizations could provide. And furthermore, by building great software, companies like Fireclay could actually have the bandwidth to offer things like commuter benefits, 401K programs, life and disability insurance and many more, all because Zenefits would handle the administration while we focused on making tile. And the best part of this, Zenefits would do it for FREE, because they were taking the broker fee and actually using it to improve the lives of its customers."
Now, here's the good news/bad news part for the rest of the insurance agent community...
First, the bad news. If consumer demand is growing for more tangible and practical value such as a platform paid for by insurance commissions, then the value of the traditional insurance agency/brokerage model just declined.
I remember sitting in a San Francisco hotel last year listening to Parker Conrad) explain his vision to a group of about 150 independent agents when someone asked if his Zenefits would be buying insurance books to grow its business. Parker simply said "No." He explained that they have no interest in taking on books of clients who are not interested in or ready for their platform...why pay for it when they could grow organically, fast, with people who saw their value?
And now for the good news, there are plenty of software and cyber platforms available to independent insurance agents and brokers that compete very well with the Zenefits of this world...not to mention the tech available in so many other areas of insurance. Future-focused insurance people—those open to going through the hardships of transition, and who can bring on the world-class support needed to service clients in both tech and insurance—will be the ones who profit in this new generation of insurance and risk management. The writing on the wall for everyone else is what concerns me.
Lynne Wallace is the CEO and president of VANTREO Insurance Brokerage and co-founder of NDOI, the National Directory of Insurance.
