The article in a nutshell

  • Zenefits’ software helps small businesses manage all of their human resources functions in one place, such as health insurance, payroll, retirement funds and equity grants.
  • The company gives its software away for free, taking a commission from vendors like insurance providers or brokerages
  • Insurance providers have no problem with Zenefits because the company sends them new clients.
  • But the brokers—those middlemen from whom Zenefits is stealing commissions—face an obvious threat.
  • One broker recently told the San Jose Mercury News that “every broker in the country is scared now of Zenefits.”
  • This week that threat manifested itself in the form of a regulatory fight: Utah has moved to ban Zenefits from offering its software for free in the state
  • It is ironic, according to Conrad, that a government agency designed to protect consumers would use its power to make small businesses pay for a free service.
  • This is just blatant overreaching where the regulator is trying to protect brokers from competition.”
  • Conrad believes insurance brokers should build their own software to compete with Zenefits, rather than try to get it banned. “In 10 years, there’s no way companies are going to be doing this stuff with a fax machine. It’s all going to be done with software,” he says. “All of the existing brokers today are all fucked.”

My perspective on this disruption and industry response

  • As with Uber it is a very typical industry tactic to try to regulate / ban a service.  This can only be a short term tactic – you are going to be disrupted
  • We have had a long held belief: If you have agent (would add broker) in your title you are going to be disrupted as you trade on asymmetric information in the market – this will eventually get replace by software as information becomes freely available.
  • As are real time example we were just updating our professional indemnity insurance and while I like working with our broker and we have a good long term relationship I was able to get a 30% discount for similar cover on the web.  Unfortunately for my broker they relationship wasn’t worth 30% to me

What should the industry do

  • Understand your unique value: Review value chain to understand where you truly add value – you need to think like a start up not an incumbent as where you think you add value is overstated.
  • As per the last paragraph in this article “Conrad believes insurance brokers should build their own software to compete with Zenefits, rather than try to get it banned.”
  • Focus on remove all the cost and waste from the value chain 


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