Massachusetts Regulators Examine Zenefits

The Massachusetts Division of Insurance said this month that it has opened an investigation into Zenefits, a troubled insurance software startup.

Founded in 2013, the San Francisco-based Zenefits offers software to small- and mid-sized businesses to help automate their HR services, including healthcare benefits. The company has some 10,000 corporate clients across the country, including more than 200 customers in Massachusetts.

But Zenefits has come under regulatory scrutiny for allegedly allowing unlicensed brokers to sell health coverage. Insurance regulators in California and Washington also recently opened investigations into the company.

Zenefits said it is taking steps to address the compliance concerns. In February, Zenefits Chief Executive Officer Parker Conrad resigned, and David Sacks, a former PayPal executive who joined as chief operating officer a year ago, took over as the new CEO. The company also appointed its first chief compliance officer.

Zenefits spokesman Kenneth Baer said that when it came to light that Zenefits had problems with its licensing compliance, the company asked an independent, Big Four accounting firm to conduct an independent third-party review.

“We also self-reported to all 51 departments of insurance across the country – including Massachusetts’ – about the issue and our internal review, and are working with them,” Baer said.

“As Zenefits’ new CEO has made clear, Zenefits has turned the page on what happened in the past, and is embracing new corporate values and culture,” he said. “Operationally, that means we have built best-in-class software in our Salesforce system that prevents anyone who is not licensed from selling a policy from selling it.”

According to media reports, Zenefits also announced in February that it is eliminating some 250 jobs, about 17 percent of its workforce, to refocus its strategy.