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California Insurance Commissioner Dave Jones revealed in a
statement that the agency had launched an investigation into
Zenefits in 2015.
Jones said he had directed the agency to use additional
resources to investigate whether Zenefits had complied with
regulations that require the licensing and training of insurance
agents and brokers.
The announcement of the investigation follows the resignation on
Monday of Zenefits Chief Executive Parker Conrad, who was
replaced amid allegations from state regulators that the startup
failed to properly license its salespeople and adequately serve
its customers.
Zenefits makes software for businesses to automate aspects of
their human resources, including health insurance.
"The recent resignation of Zenefits' CEO Parker Conrad is an
important development, but it does not resolve our ongoing
investigation of Zenefits' business practices and their
compliance with California law and regulations," Jones said.
The department said it will not release information about its
findings until the investigation is complete.
Zenefits did not immediately respond to Reuters' request for
comment on California's investigation.
The investigation was first reported by media outlet BuzzFeed on
Thursday. The news site had also previously reported, following
BuzzFeed's investigation of the company, that Zenefits allowed
salespeople without licenses to act as insurance brokers in at
least seven states.
San Francisco-based Zenefits is also under investigation by the
Washington State Office of the Insurance Commissioner, a
spokesman for the agency confirmed to Reuters in an email, for
what was described as "unlicensed sales related to insurance
policies."
"The investigation could result in some kind of enforcement
action, but that is still undetermined," wrote Steve Valandra,
the agency's deputy commissioner for public affairs.Zenefits
provides free software for businesses to manage stock options,
maternity leave and vacation time, among other benefits. The
company makes money acting as a high-tech health insurance
broker, working as the middleman between businesses and
healthcare providers such as Anthem Blue Cross, and earning the
commission or broker fee.
Zenefits' newly appointed CEO, David Sacks, who joined the
company a year ago as chief operating officer, confirmed
compliance issues in a letter to employees on Monday that was
seen by Reuters.
"The fact is that many of our internal processes, controls, and
actions around compliance have been inadequate, and some
decisions have just been plain wrong," Sacks said in the letter.
(Reporting by Heather Somerville; Editing by Diane Craft)
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