AgentSync’s Passion for Compliance Stems from Hard Experiences at Zenefits

Summary:

• AgentSync’s products have a good market-fit because they were developed based on real pain points
• The headline-grabbing compliance problems faced by the insurance side of Zenefits could have been prevented by automated license controls
• Solutions rooted in experience and real industry pain are superior to those based on software-first insurtech ideas

As AgentSync grows, adds to its product roadmap, and continues to affirm its product-market fit and customer-first approach, it’s important to keep in touch with our roots. We never forget what drives the company’s mission of building a modern insurance infrastructure to last.

Experience is, famously, the most instructive teacher of life lessons. This is particularly true for AgentSync’s co-founders Niranjan “Niji” Sabharwal and Jenn Knight, and is the spark that ignited AgentSync’s creation. 

Their drive to innovate, to solve real problems for insurers, and to find a stellar market-fit are inspired by what the two call “shared pain.” For them, it is the first-hand experience of having compliance – or lack thereof – be a business-defining pain point, and the balm of using the right digital tools to make it virtually frictionless and automatic.

The origin story of AgentSync’s passion for aligning growth and compliance begins with another startup, Zenefits, and its initial failures – and later successes – with producer licensing compliance.

Trial by fire: Zenefits and the perils of hypergrowth

In 2014, Niji joined Zenefits to lead the sales operations team in its mission to make the digital human resources provider a market-dominating force. One of Zenefits’s promises was to connect clients to insurance benefits, a role that necessitated sales team members having active insurance licenses in the states they sold in.

The company was in a stage of hypergrowth, adding headcount so fast it inspired a wave of headlines in 2015, such as “Zenefits Financials Reveal It Is One of the Fastest-Growing SaaS Businesses Ever.” 

“We were adding new team members every day,” said Niji. “Sales were exploding. Staffing couldn’t keep up. And our team underestimated and underappreciated the role of brokers and broker licensing – compliance just wasn’t a priority, largely because no one understood it well enough to make it one.”

Days after the first legal team member was hired in March 2015 – when the company had already handily passed a 700-strong headcount – the Washington Department of Insurance notified the team: The state received complaints about unlicensed insurance sales by Zenefits brokers and was opening an investigation.

After this first notice of noncompliance, the legal team tasked Niji with on-the-ground compliance operations for the rest of the sales team. Headcount was skyrocketing faster than the new compliance efforts could keep pace, and with each new sales team member the problem only grew worse. 

Niji’s early attempts to verify broker licenses were much what you’d expect: days spent filling out spreadsheets, emailing team members to get national producer numbers (NPNs), manually running a database of NPNs through the National Insurance Producer Registry’s Producer Database and checking for approval for pending licenses daily… Each attempt to enforce compliance was an exercise in frustration, even as the company added new sales staff, meaning more licenses, every day.

“It was an impossible task to maintain broker compliance with a growing and evolving business using only a spreadsheet,” Niji said. “The more we caught up with requirements, the more we realized we were missing.” 

This eye-opening crash course in producer licensing compliance planted the seed in Niji’s mind that there had to be a better way, and that this problem was a perfect use case for a software solution. 

Consequences when compliance takes a backseat to growth

As the Zenefits team worked to understand the extent of their compliance problem, other state DOIs began tallying the business’s unlicensed sales, something investors and C-suite executives couldn’t afford to ignore. 

Facing potential fines mounting over $10 million, the company came to some sobering conclusions, embracing new leadership and an emphasis on compliance. David Sacks, who took over the role of CEO in the aftermath, strove to set a new tone moving forward.

“In order to be a great company, integrity must be at the core of what we do,” David said. “We sell insurance in a highly regulated industry. In order to do that, we must be properly licensed. For us, compliance is like oxygen. Without it, we die.”

Zenefits proactively opened their records to regulators, self-reporting violations to all state departments of insurance and overhauling its compliance procedures. Multiple state regulators praised the company’s turnaround, including the Tennessee Department of Commerce and Insurance:

“Under the company’s past leadership, compliance with insurance laws and regulations was almost an afterthought,” a Tennessee news release said. “… Fortunately, new company leadership has demonstrated a dedication to righting the ship.” 

Innovation makes compliance controls automatic, saves dollars, and just makes sense

The most important step in Zenefits’ turnaround was addressing the core issue: lack of producer licensing compliance. And the root cause of a lack of compliance was how manual, clunky, and difficult it was to ensure compliance. Niji found himself looking for ways to make license compliance easier, even automatic. Despite the fractured state-by-state regulations, a source of truth existed in the NIPR Producer Database. And NPNs provided a simple vehicle for finding information.

Niji led a tech team to build an innovative Salesforce app to handle compliance controls, called Licensing+. Zenefits deployed the tool, which automatically stopped producers from accessing sales or regional data if it was outside of their licensing. Licensing+ raised Zenefits’ compliance rate from abysmal failure to 99.9 percent as proven in a third-party audit by PriceWaterhouse Coopers and accepted by the California DOI. To show regulators their good faith, the team open-sourced the code, allowing others in the industry to download and manipulate it for their own purposes.

“The first hundred or so people to download it were mostly carriers,” said Niji. “It underscored that, although Zenefits’s licensing troubles were taken to an extreme, we weren’t the only ones struggling to maintain compliance. And I thought, ‘What if something like this had existed before?’”

Regulators agreed. With an initial fine of $7 million levied against the company, California ultimately suspended half of the fine thanks to the company’s dedicated response. Texas, too, called out the Zenefits compliance team’s newfound dedication, mentioning Licensing+ by name in their final order.

State by state, DOIs acknowledged the incredible turnaround.

“PwC reviewed the operation of the licensing controls and found that Zenefits’ new systematic controls work effectively to prevent licensing non-compliance,” said Massachusetts’s news release.

It wasn’t just state DOIs that took notice: Salesforce included the Licensing+ tool in the Trailblazer’s Guide to Apps. And Licensing+ took a Silver Stevie Award in 2017 for Sales Automation. Despite its troubles, Zenefits ultimately became a compliance success, with the Licensing+ tool paving the way for a new era of automated license compliance. 

Compliance as a Service becomes passion project

As Niji closed the chapter on his Zenefits career, the tangles of insurance compliance piqued Jenn’s interest, as well. Jenn’s background as a software developer for companies like Stripe, Dropbox, and LinkedIn, and a love for tackling sticky problems gave her an appreciation for the technical aspects of the compliance troubles Niji was trying to solve.

When their every conversation turned back to Licensing+ and the difficulties of maintaining licensing compliance, the two knew they were at a pivot point.

“There was this moment when we were talking about it, and we said ‘If not now, when?’” Jenn said. “We knew from experience we could work together to build things, and we didn’t have kids, we didn’t have a mortgage, and here was this obvious problem that needed a solution.”

Automated producer compliance had plenty of tangles for Jenn to work on. Licensing+ had been a great proof-of-concept tool, but solving problems at scale would require a more robust solution. State regulations posed a steep learning curve, with some states boasting a more thorough integration with NIPR than others, and each state using its own taxonomy for parts of the licensing process.

“The spirit of building this tool was spot-on for my interest – helping business partners get an understanding of workflow, getting it unstuck, removing clunky manual processes,” said Knight. 

Jenn and Niji took the underlying ideas of Licensing+ and built from scratch the first-in-the-industry daily NPN sync to expose licensing and appointment data. From there, they expanded their team and product functionality, partly through the continued feedback and use-case inquiries of their client base. 

“Our customers really are our partners,” said Jenn. “It’s invaluable to have people who are willing to work with you to solve their problems, and who share your enthusiasm.”

When compliance and growth align

These days, Niji and Jenn still tackle the hairy process problems of the insurance industry. With first-hand pain and the experience of solving first-hand problems, our customers know they’re heard. The AgentSync roadmap is rooted in industry feedback, not just based on the ease of work for an engineering team more versed in tech than in insurance. 

Of the lessons he learned at Zenefits, Niji said one stands out above the rest: “If compliance is too hard, organizations won’t do it.  The role of powerful, easy-to-use tools is critical.”

If you’re ready to work with an experienced compliance partner with a dynamic, evolving roadmap and solutions suite, check out what AgentSync can do for you.

Key takeaways: 

• Manual compliance is a pain point that worsens with growth
• Automatic compliance enables scalability
• Neglecting licensing is a great way to learn the importance of it – the hard way
• Experience counts – learning from others’ successes and failures is valuable and far less expensive than doing it all firsthand