By Michael Lujan, Co Founder/Chief Strategy Officer for Limelight Health & CAHU President-Elect
Many agents are now familiar with this YouTube video when an early-stage Zenefits was pitched to a panel of potential venture capital investors. It’s how many agents came to learn about Zenefits, unless maybe you had the misfortune of losing a client to Zenefits by an agent of record change. So we talked about this audacious remark and his disruptive business model for more than an hour at the sold out event hosted at the Plug and Play Tech Center in Sunnyvale (where PayPal, DropBox and many other hot startups were born). I believe it was his first time speaking in front a large agent audience.
This was a special meeting of the Silicon Valley Association of Health Underwriters (SVAHU) with more than 200 members and guests; mostly insurance agents. As the incoming President of CAHU (our state association) and co-founder of my own benefits tech startup, I was proud to moderate the conversation with Parker.
In summary, I first asked why he wanted to speak to an audience of brokers and what was in it for him. He said he simply wants to be a member of the broker community and also recruit experienced agents for his company. (BTW – Parker is a new member of the Golden Gate chapter) We had a chance to chat earlier in the week to prepare for this event and frankly, to his credit no questions were off-limits and he was very transparent and invited edgy questions. My summary notes:
Okay, so let’s talk about “milkshakes” and some other offensive remarks made about agents at the 2013 Tech Crunch Disrupt NY event… Do you still feel the same? He said it was about context and admits he would have said it differently today. In 2013, Zenefits was a very early-stage startup with only three employees and just launched. ” We were trying to be audacious”, Parker said of the May 2013 event where he pitched to an audience of tech folks and investors.
Now, two years later he says, “It’s not just a Zenefits thing. There’s a transition in the benefits broker space for brokers that serve companies with less than 1,000 employees. For me it’s very clear what the end-state of that transition is. …that every broker is a technology company and is offering their clients technology so they can manage all of this stuff with technology… …and there may be firms that can make the transition of reinventing themselves as technology companies.”
He added, “Anyone who can’t make this transition… …those agencies are going to disappear.”
“Brokers are as much a victim of the state of technology as their clients are. (referring to old carrier legacy systems or procedures, paper forms, faxed applications)
He believes there are several new technology companies coming to this space and when I mentioned one of his newer competitors Namely, they may have challenges with technology and trying to be a broker. “Well, so are you”, I quipped. I am not certain I understand the difference between their models but the point is there are many more Zenefits-type coming so agents should pay attention to this trend.
One of the biggest differences between Zenefits and traditional brokers? They (Zenefits) don’t visit their clients; almost never. It’s a customer service team and telephonic relationship. Not a call center but specialist in HR, compliance and benefits.
On recruiting agents to work for Zenefits: I asked in the tone most agents in the room might be thinking; “If I’m an agent, with equity and ownership of my book of business, Why would I want to work for you?” He said it’s a chance to a part of industry transformation. They started with $1 Million in revenue, grew to $10M, reset their goals to $20M in 2014. He plans to be at about $135 Million in 2016. In short, you can be a part of this growth.
He also shared some numbers and metrics: They have a 15 to 30 day sales close-time; sales reps have a $1.3M quota in (net new revenue)… their Ideal client is 20 to 150 employees, but it’s evolving to larger groups. Average client size is 16 or 18 employees (lives); they have about 100,000 total subscribers and adding 20,000 new each month.
After raising more than $80M from VCs, and possibly another massive investment round coming soon, I asked if this validation of the viability of the small group market? (I referenced Zane Benefits and others who believe the employer-based market is doomed). Parker said it’s less about the durability of the small group market. If self-funded, individual… whatever direction, Zenefits will offer on their system.
On his broker of record strategy and clarity of the message (Is it clear to employers they will be losing your incumbent agent?) He insists it is and always has been clear although I shared anecdotal stories of employers not knowing they were firing their agent. Parker also says his new enrollment is more organic growth and not agent of record changes and invites agents to go to his website to see how unambiguous his BOR message is for employers.
Are you profitable yet? No. He adds there are front-loaded costs of customer acquisition which is recovered and amortized over time… something agents understand all too well and why we don’t like BORs. But he explained they are reinvesting in their sales growth which is not unusual for startups (I agreed and added Salesforce (and other growth-focused companies) has not been profitable in ten years).
Are you willing to partner with brokers? No. We tried it with a couple of folks and it did not work. They need to be really good at both benefits and selling technology and their two pilot brokers were not proficient selling technology.
Are you more of a benefits company or a technology company? Both, you don’t have to choose. Uber is a good example as they are both technology and transportation.
On anti-rebating laws, what’s happening in Utah and other states where Zenefits was or might be banned? Gov in Utah did not change law but recently clarified that Zenefits did not run afoul of law. He adds, time and attendance systems are a must for employers to manage hours and eligibility for benefits and employer mandate (as employee hours may often fluctuate).
My last word: Having Parker speak at SVAHU was controversial to our members and brokers in general. (When I asked the audience if they found the meeting valuable and informative, we had a genuine eruption of applause) We believe our market will be greatly improved by more agent-focused technology and elements of what Zenefits offers. But, being a member of the broker community requires more than just having a license. NAHU and our members are committed to professional development, advocacy for our industry and the clients we serve, and networking to help connect with our peers (as friendly competitors) to effectively help “all boats rise”.
Seeking some common ground, I suggested we may actually share at least three principles or beliefs. We share a disdain for agents that fail to deliver meaningful value, service and support to their clients (they make good agents look bad). We agree the health insurance industry has been woefully behind in adopting technology and the Affordable Care Act, while being very disruptive, creates great opportunity for agents who can adapt. Parker agreed.
Parker’s closing comments summarized his value proposition and another call for recruiting experienced agents to join his company.
Why was he invited? To clarify, he asked to speak and there was considerable debate before deciding to go ahead. I am sharing my summary notes for the many agents who posted questions and comments in LinkedIn and other community boards about Zenefits and the temporary technology gap for traditional agents. There are many new agent-friendly solutions and resources available now and more coming soon. Many of you could not attend the meeting and some agents deliberately avoided this meeting feeling it was wrong to allow Parker Conrad a platform to recruit or boast of his growth at the expense of traditional agents. I really get it.
I also get the trend is real and the entire purpose was to edify our members and guests and share resources accessible to agents. The list will grow and agents should be encouraged by the explosion of all-in-one and À la carte technology tools to help you grow your agency. I invite you to join your local NAHU chapter and keep an open mind about your own agency value proposition and if it’s time to reevaluate your technology options and business plan.
In the first hour of our program, Joe Markland from HR Technology Advisors shared an inspiring and thoughtful presentation to help agents understand their options and his consultant resource. It’s worth a visit and his recorded webinars are available on his website.
Kudos to Michael Traynor and the SVAHU board and committee for their excellent work and bold leadership.
About Michael Lujan
Michael Lujan is Co Founder and Chief Strategy Officer for Limelight Health, a Silicon Valley-based start-up. With venture seed funding from Launchpad Digital Health and a group of private investors, Limelight is a new quoting technology platform for health insurance agents, carriers, general agents and private exchanges. QuotePad, their first product is SaaS based technology, offering mobile-quoting with open integration with payroll, benefit administration, CRM and other agency tools.
Michael is CAHU President-Elect and Chair for CAHU’s new Diversity Task Force, aimed to promote our diverse agent membership and mobilize licensed agents to serve all Californians.
In 2012, Michael helped establish the California Health Benefit Exchange, now known as Covered California. He served as Director of Sales and Marketing for both the individual and small group segments. He was responsible for establishing the initial policies for licensed agents, hired the administrator for SHOP (Pinnacle) and recruited more than 20,000 California agents to get registered. To date, there are nearly 15,000 agents certified with the exchange. A former agent, general agent and Director of Sales for Blue Shield of California, Michael is an outspoken advocate for the agent distribution channel, small business and the uninsured.