Zenefits, the startup insurance broker that raised $512.6 million of venture capital in May 2015, has lost millions, seen major leadership changes and settled with 20 states over law violations. This timeline highlights the company’s recent challenges and changes.
News broke that Zenefits allows salespeople to act as insurance brokers, but don’t have the licenses to do so,” reported Megan Rose Dickey for TechCrunch.
David Sacks, who is associated with billionaire technology investor Peter Thiel, became the chief operating officer.
The company lost $204.5 million at the end of its fiscal year, wrote William Alden for CNBC.
The company ousts founding CEO Parker Conrad as it became clear the company violated insurance laws across the country. The official reason for Conrad’s departure: “inadequate compliance procedures and internal control,” wrote Jessica Guynn for USA Today.
Sacks became CEO and started restructuring the company by laying off workers and offering severance for those who quit, Alden wrote. Sacks also started restructuring real estate and legal expenses.
Zenefits continued to lose money: “In the first half of its current fiscal year, Zenefits lost money at about the same pace (as the previous year), with a $100 million loss on revenue of $35.3 million,” wrote Alden.
The state of Washington fined the company $100,000 for employing unlicensed brokers, wrote Brian Solomon for Forbes. Meanwhile, Sacks’ promised to focus on complying with insurance laws and regulations.
The California Department of Insurance fined Zenefits $7 million for “multiple license violations,” wrote Dickey. “The department specifically charged Zenefits with allowing unlicensed employees to sell insurance and with circumventing the required pre-licensing education and study requirements.”
The state of Washington ruled Zenefits must charge customers, rather than giving away its software for free “because it violates the state’s law against inducements,” reported Solomon. “It is unclear whether others will follow Washington’s lead to make Zenefits raise prices,” Solomon writes. “Utah previously banned Zenefits for violating its inducements law, but wrote a new law in 2015 that let the startup back in.”
In response, Zenefits adopted a “paid app store-like approach.” This happened as Sacks announced he’s stepping down, leading the search for a new CEO and becoming the company’s chairman. “The chairman role will allow me to focus on what I do best — product and strategy — while working with a great operator who can help build our small business pipeline,” he wrote in a memo, Guynn reported. “We successfully resolved the issues that gave rise to the crisis, signing a deal with our lead regulator, the California Department of Insurance. We’ve also settled with 19 other states, including Washington.”