The Illinois Department of Insurance (“DOI”) has reached an agreement with YourPeople, Inc., d/b/a Zenefits FTW Insurance Services providing that the California-based human resources software and insurance brokerage company will pay a civil forfeiture of up to $560,000 to settle allegations that it violated Illinois insurance law.
The forfeiture, believed to be one of the largest in the DOI's history, follows a nearly year-long investigation by the DOI's investigations division that determined that an estimated 279 transactions concerning the sale, solicitation, or negotiation of insurance in 2015 and prior years involving Illinois-based small and medium sized business clients had been conducted by Zenefits employees who were not properly licensed to sell insurance in Illinois.
The DOI said in a statement that, in conjunction with the investigation of these practices by Illinois and other states, Zenefits had largely replaced its prior management team, including its former chief executive officer, and had instituted new controls and procedures to ensure that its employees were properly trained and licensed.
The DOI said that it would continue to monitor the company's practices to ensure compliance with Illinois law.
The DOI's acting director, Jennifer Hammer, said, “Zenefits failed to comply with Illinois insurance licensing laws. We are glad we were able to protect the citizens of Illinois in this case.”
During a parallel review, the DOI said that it did not uncover evidence that Zenefits had engaged in unlawful rebating, which would have been a further violation of the Illinois Insurance Code. As Zenefits' current business model as presented includes the provision of free human resources software to anyone, and additional website features provided to businesses that purchase insurance through Zenefits solely are limited to the servicing of that insurance, the DOI said that its review concluded that no unlawful rebate or inducement was provided to customers under Illinois law. It added that this determination remained subject to review in the future should further evidence be received or should the company's business practices change.
Of the $560,000 civil forfeiture, $100,000 will be suspended pending the successful completion of a period of probation detailed in the settlement.
Illinois was the 17th state to reach a settlement with the company for alleged insurance code violations.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].