Zenefits is one of the most-valuable startups in the world at the moment, but its $4.5 billion valuation has been called into question in recent months, which means this is a horrible time for the company to be getting into legal trouble, but that’s exactly what’s happening. According to a report from Buzzfeed, the startup allowed unlicensed brokers sell health insurance, which prompted at least one commissioner in Washington to investigate the matter.
Cloud HR platform Zenefits may have allowed salespeople to illegally act as insurance agents in at least seven states. According to a Buzzfeed investigative report, the startup let unlicensed brokers sell health insurance, leading to at least one commissioner to investigate in Washington state. Those unlicensed solicitations go back to at least the summer of 2014, and the Washington state office of the insurance commissioner started looking at the potential violations earlier this year, ccording to the report. This is not the first time Zenefits has faced legal scrutiny for possible insurance violations. The Utah Insurance Department took the startup to task over claims it was illegally giving insurance software away for free. Regulators at the time said that violated local laws and that it was unfair to traditional insurance brokers. Utah legislators threw out the complaint and let Zenefits get back to business after both the Utah House and Senate overwhelmingly voted to let the startup continue operations. The broker license violation looks a bit more serious and could be considered a Class B felony, under Washington state law. Violators may be subject to a prison sentence of up to ten years as well as face a $20,000 fine.