Any business with true potential to disrupt an industry will run into obstacles, many of them legal obstacles...the entrepreneurs know it, the investors know it, and the businesses being blind-sided and displaced know it.
Uber, committed to filling what was a little known gap in transportation, faces over 170 lawsuits related to everything from local ordinances, fees, permits and taxes, to independent contractor status, A.D.A. issues, being banned at airports, potential insurance gaps, and the list goes on.
Similarly, Airbnb, working hard to redefine "availability" in lodging, is being challenged by the legal implications of city zoning and administrative codes, and backlash from the hospitality industry.
This week, Zenefits, a self-proclaimed insurance disrupter, ran into an obstacle...something about selling insurance without a license (if you don't know what I'm referring to, just Google "Zenefits compliance issues.")
Zenefits, unlike Uber and Airbnb, chose to disrupt the highly-regulated insurance industry...an industry that, in order to protect consumers, not only requires both sales and service people to be state-licensed and mandates continuing education to stay licensed, but also prides itself on its hard-won educational designations.
At its core, Zenefits tried to disrupt the insurance industry using leading-edge technology but seemingly without regard for the insurance expertise and high level consumer advocacy clients expect from their insurance broker. Simply trading tech for a broker of record letter on health insurance is like offering a robot to do brain surgery without having a licensed physician in the room. In insurance, technology may save you administrative time (awesome news), but a poor substitute for lack of expertise to resolve an insurance issue should a family member become seriously ill.
Selling insurance without a license is a misdemeanor in most states. With all of its major investor funding, Zenefits will likely resolve their compliance issues. I do find it interesting, however, that with all of their new heavy hitters (a Big Four auditing firm, a new CEO, a former federal prosecutor to head compliance, etc.), there's no mention of an experienced insurance professional in top management or on the board. Could it be they just didn't see the need? Perhaps they couldn't find a high level insurance executive who was tech focused, open to fitting into their culture, and could move at warp speed pace? Or maybe, most of the insurance community has been so offended that no one applied?
Like it or not, Zenefits has helped the insurance industry. They showed up, guns blazing, and opened our eyes to what clients want and how fragile their loyalty may be. They gave us a glimpse at what is possible with tech today. Many of us have become early adopters, adding our own version of online HR, benefits administration and compliance, something we may not have done without the Zenefits threat. Their obstacle will not reverse progress or slow the fever for insurance disruption...rather it's a call for a more genuine collaboration between the tech world and the insurance industry.
Am I missing anything?
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Lynne Wallace is the CEO and president of VANTREO Insurance Brokerage and co-founder of NDOI, the National Directory of Insurance.
