The California Department of Insurance announced the conclusion of an enforcement action against Parker Conrad for his alleged role in licensing compliance violations that occurred at Zenefits during his tenure as CEO.

The CDI claimed that YourPeople, Inc., doing business as Zenefits FTW Insurance Services, was formed in 2012. Zenefits has held a California resident business entity insurance producer license since October 1, 2013. Conrad was identified in licensing applications submitted by Zenefits as the only designated responsible licensed producer endorsed to transact on behalf of Zenefits.

Zenefits provided businesses with a cloud-based software platform to manage human resources, payroll, as well as benefit functions with a focus on health insurance coverage. Zenefits offered its software to users free of charge and earned revenue when customers selected Zenefits to act as their insurance broker of record. As broker of record, Zenefits assisted its customers with the purchase and administration of group health insurance policies. In return, Zenefits earned commissions from insurers.

In late 2015, the department learned of alleged violations regarding the transaction of insurance by unlicensed Zenefits’ employees as well as the creation of a software macro that enabled employees to circumvent the pre-licensing study requirements.

Following an investigation, the department concluded an enforcement action against Zenefits in November 2016.  After the filing of an Accusation, Conrad entered into a settlement with the department resulting in the surrender of his insurance license.

Zenefits agreed to pay a fine of $7 million, with half of the fine suspended if Zenefits had no future insurance code violations. This was one of the largest fines imposed for licensing violations in the history of the department.

Conrad was a co-founder of Zenefits and acted as the company’s CEO from its inception in 2012, until his resignation in February 2016. He also held a seat on the company’s board of directors and had an ownership interest in the company during the time the alleged violations occurred.

In addition to surrendering his license, Conrad agreed to pay $66,000 in reimbursement costs to the department and to not transact insurance, either directly in his name or indirectly by managing or directing the transaction of insurance through any other licensee, without first applying for and obtaining an insurance license.

“As Zenefits’ CEO, the buck stopped with Parker Conrad,” said Commissioner Jones. “Unlicensed insurance transactions occurred under Conrad’s management and employees were provided with a computer program that enabled them to skirt the pre-licensing education requirements. Conrad was ultimately responsible.”