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US: Utah insurance officials demand changes to startup pricing model

By  |  December 4, 2014

The Utah Insurance Department is reportedly demanding insurance startup Zenefits to raise prices, claiming the company’s business model violates competition rules.

The UID reportedly sent a letter to Zenefits on November 20 in which Insurance Commissioner Todd Kiser challenged Zenefits’s practice of giving its software away for free. The UID had been investigating Zenefits since June and released its findings several weeks ago, but the letter was only recently made public, say reports.

Zenefits allows human resources departments to use its software to manage the benefits of company employees. While the software is given away for free, Zenefits profits from commissions generated as an insurance broker.

But Utah insurance officials say this practice violates antitrust rules and that the company should have to charge a “fair market value” for its services. Giving away the software for free, the sate says, undermines competition for other insurance licensees.

The company is now being ordered to pay up to $97,000 if it fails to change its business practices.

Full content: Tech Crunch

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