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Alternative title: "Zenefits Scandal Highlights Perils of Excessive Occupational Licensure". What exactly is the purpose of requiring a license for selling insu

by jmckib 11y ago

Alternative title: "Zenefits Scandal Highlights Perils of Excessive Occupational Licensure". What exactly is the purpose of requiring a license for selling insurance? If consumers desire some assurance of quality in their insurance brokers, then certification, not licensure, would be sufficient. The only justification for licensure over certification is a paternalistic one: consumers are simply too ignorant to choose their own insurance brokers, even if some are certified and some are not. As Milton Friedman said in Chap 9 of Capitalism and Freedom, this argument "amounts to saying that we in our capacity as voters must protect ourselves in our capacity as consumers against our own ignorance." This isn't to say that Zenefits hasn't made a huge misstep for seemingly little benefit (bypassing a 56 hour course?), but I wish there was some discussion of the absurdity of the law that was broken alongside the bashing of Zenefits for breaking it.

CPLX 11y ago
Insurance is important. Unlike many other consumer products you really don't have any idea what you're buying until after you've bought it. Making an incorrect or misled choice in health insurance is sufficient -- literally -- to completely ruin your life financially in a matter of hours, or cause unnecessary death via untreated illness. If you want to claim that you can read a health insurance policy binder and understand it be my guest. I am a frequent writer and editor of technical literature and capable of writing code and I have a pilots license and I find health insurance policies almost incomprehensible. We make sure that you don't get a bad haircut by requiring licenses for barbers. You can't fix my sink or chimney without licensing. We require licensing and testing to act on someone's behalf in the legal system, and in nearly all sales of securities, and of financial products, of which insurance is one mind you. If Zenefits wanted to make an in-public argument that these rules are not necessary they were free to do so. I would have disagreed, and I'm sure others would have shared my opinion. Maybe they could have won the argument. They didn't do that. They aren't righteous crusaders passionate about consumer choices and regulatory issues, they're opportunistic business people who broke the law and committed fraud instead of following the rules or working to change them.
- yummyfajitas 11y ago
  Since you would have disagreed, can you explain why you think 52 hours of clicking "next" is a necessary step in becoming a broker? Zenefits employees did pass the exam, and they possess the knowledge you believe is necessary. It's just that the law requires 52 hours of clicking before you are even permitted to take the exam. Why do you think this is a good law?
  - arihant 11y ago
    It's not an exam to pass. A license must be earned continuously by practising within law. A license would be taken away even if you have the best knowledge but are even slightly off on ethics of practice. A policeman can be strongest, but a sexual harassment case will disqualify him. When I see a broker license, I know I'm dealing with a knowledgeable, honestly practising professional. Can't say that about Zenefits anymore. They must lose license. EDIT: You can give credit to any kind of cheating with the reasoning you gave. Why is SAT I verbal section important in a student becoming an electrical engineer? He should be allowed to cheat, according to you?
    - yummyfajitas 11y ago
      Scroll up: the question is not whether Zenefits should obey dumb laws. CPLX said he would argue that the law in question isn't dumb. I think a person should be allowed to take the SAT without actually being obligated to click "next" for 52 hours. If they don't know the material they'll get a low score.
      - arihant 11y ago
        This is not SAT unfortunately. Your score and your behaviour are both needed for a license. Besides, in situations like these attendance policy is important. You can't test every single edge case possible on a test. The state has to answer if a license holder says "I did not know X." As a taxpayer, you would question why the hell does a person who does not know X has state license to practice? Unless you're asking every person to recite the whole textbook, the only way to be sure is an attendance policy.
arihant 11y ago
The reason for license is that it can be taken away. In cases of malpractice of selling crap for brokerage, you can't simply uncertify a person. But you can take away their license. It's also the signal to customer that the guy they are dealing with did not simply pass a test, but is actively practising the profession in a manner he is supposed to.
- jmckib 11y ago
  Maybe I should have defined what I meant by certification. The only difference between a license and a certificate is that you must have a license in order to legally practice, while a certificate is optional. There's no reason that a certificate couldn't be taken away just like a license if, say, someone fails an annual test.
  - arihant 11y ago
    No you can't take away a certification. You can make it certified every year. But a certification exists to certify that you tested OK in 2014, for example. You can't take that away because you can't say he did not pass the test. You can outlaw certifications over a year old, but you cannot take the earned certification away. Besides, you cannot take them away mid-year for malpractice. Once you're certified to pass something, you have passed it. You can't go back in time and unpass it.
    - jmckib 11y ago
      You just have a different definition of certification than I do; we're not actually disagreeing on anything substantial.
      - arihant 11y ago
        True. I think we both generically seem to be saying the same thing. The disagreement seem to be on the topic of whether it should be compulsory or not. I do believe that it should be regulated and compulsory. It's much simpler to teach 300 million people to just check for a license than to teach them about how to vet your broker.
mcguire 11y ago
"Alternative title: "Zenefits Scandal Highlights Perils of Excessive Occupational Licensure". What exactly is the purpose of requiring a license for selling insurance? If consumers desire some assurance of quality in their insurance brokers, then certification, not licensure, would be sufficient." Wasn't there just recently an article here complaining about the quality of academic accreditation, or in other words about how those certifications were simply bogus? Let's say you buy insurance. Let's say that after paying premiums for a couple of years, you come down with some dread disease. You contact the insurance company to tell them that you need $737,248.44 or you'll die from your dread disease. They say, "LOL. We don't do that. So sorry." You visit your broker and he says, "I didn't know! I just printed up a certificate and hanged (hung?) out my shingle. Guess you're out of luck." Lawsuit time? Hm. I suppose your estate would still have standing to sue. Unless we've got tort reform as well as licensing reform. Anyway, the neat part is there isn't any consequences to the broker. Sure, you could hit him with fraudulently claiming to be certified, but there are all these other people doing the same sort of thing without any certification at all, so it doesn't sound like a major crime. And of course, we're talking about employment benefits, so you aren't the one picking the broker, your employer is... Here's the question: How would any approach to avoiding that situation not involve something that strongly resembles licensing? (Here's a hint: what is the difference between pulling someone's certification and pulling their license?) "The only justification for licensure over certification is a paternalistic one: consumers are simply too ignorant to choose their own insurance brokers, even if some are certified and some are not. As Milton Friedman said in Chap 9 of Capitalism and Freedom, this argument "amounts to saying that we in our capacity as voters must protect ourselves in our capacity as consumers against our own ignorance."" Actually, that's a pretty fair description of what is going, how it's supposed to work, and why. Here's another quote for you: "The doorstep to the temple of wisdom is a knowledge of our own ignorance," which may or may not be Benjamin Franklin. But I suppose the idea that one may not know something, and that the something might be important, is unappealing to many people. Stop and ponder for a moment how much trust you put into the people around you on a daily basis. And most of them don't even have an incentive and opportunity to screw you. Now, about the 50-odd hour spree of next-clicking... History is path dependent, and any optimal solution to a problem (or apparently optimal, on theoretical economic grounds) may not be reachable given the previous states of the system. Have to click next for 50-hours? Probably because the real, physical class takes 50-ish hours to cover the material. Why have a class at all? Why not just have an exam? (Anyone here familiar with the various industrial certification exams around? Trust 'em?) The exam is also likely pretty simple, otherwise you have no brokers and the insurance sales system becomes very expensive. (Has anyone reading this passed the bar?) So consider it from a liability standpoint: with a class and an exam, a "reasonable person" can be "assured" that the broker has been exposed to the appropriate information and has understood it adequately.
rayiner 11y ago
Milton Friedman's argument is wrong. Licensure requirements are voters delegating due diligence to a trusted body because they acknowledge their own ignorance. I have neither the time nor the inclination to carefully read an homeowner's insurance agreement to see if someone is trying to screw me, or to figure out if a "certification" actually means anything or is some bullshit anyone can hand out. As a voter, I'm happy to put someone else in charge of doing the leg work, so I can buy insurance, buy groceries, eat at a restaurant, etc, and be assured my interests are at least minimally protected.
- jmckib 11y ago
  > Licensure requirements are voters delegating due diligence to a trusted body because they acknowledge their own ignorance. Certification also amounts to delegating due diligence. Licensure goes a step beyond that by actually forbidding voluntary exchange in certain cases. You are not just delegating due diligence, you are delegating your freedom to make your own choices. > or to figure out if a "certification" actually means anything or is some bullshit anyone can hand out. You still have to do legwork to figure out if a license is just bullshit. Because licensure is almost always controlled by members of the given occupation, there is a tendency for more and more bullshit to creep into licensure requirements over time, stuff that has nothing to do with actual competence, because it creates a barrier of entry into the occupation. Friedman has countless examples in his book.
st3v3r 11y ago
No, that's not an alternative title. Do NOT go around excusing their behavior by claiming they were forced to by "excessive licensing". They knew exactly what they were doing. The responsibility is entirely, solely, 100% on them, and no one else.

by jmckib 11y ago

CPLX 11y ago

Insurance is important. Unlike many other consumer products you really don't have any idea what you're buying until after you've bought it. Making an incorrect or misled choice in health insurance is sufficient -- literally -- to completely ruin your life financially in a matter of hours, or cause unnecessary death via untreated illness. If you want to claim that you can read a health insurance policy binder and understand it be my guest. I am a frequent writer and editor of technical literature and capable of writing code and I have a pilots license and I find health insurance policies almost incomprehensible. We make sure that you don't get a bad haircut by requiring licenses for barbers. You can't fix my sink or chimney without licensing. We require licensing and testing to act on someone's behalf in the legal system, and in nearly all sales of securities, and of financial products, of which insurance is one mind you. If Zenefits wanted to make an in-public argument that these rules are not necessary they were free to do so. I would have disagreed, and I'm sure others would have shared my opinion. Maybe they could have won the argument. They didn't do that. They aren't righteous crusaders passionate about consumer choices and regulatory issues, they're opportunistic business people who broke the law and committed fraud instead of following the rules or working to change them.

yummyfajitas 11y ago
Since you would have disagreed, can you explain why you think 52 hours of clicking "next" is a necessary step in becoming a broker? Zenefits employees did pass the exam, and they possess the knowledge you believe is necessary. It's just that the law requires 52 hours of clicking before you are even permitted to take the exam. Why do you think this is a good law?
- arihant 11y ago
  It's not an exam to pass. A license must be earned continuously by practising within law. A license would be taken away even if you have the best knowledge but are even slightly off on ethics of practice. A policeman can be strongest, but a sexual harassment case will disqualify him. When I see a broker license, I know I'm dealing with a knowledgeable, honestly practising professional. Can't say that about Zenefits anymore. They must lose license. EDIT: You can give credit to any kind of cheating with the reasoning you gave. Why is SAT I verbal section important in a student becoming an electrical engineer? He should be allowed to cheat, according to you?
  - yummyfajitas 11y ago
    Scroll up: the question is not whether Zenefits should obey dumb laws. CPLX said he would argue that the law in question isn't dumb. I think a person should be allowed to take the SAT without actually being obligated to click "next" for 52 hours. If they don't know the material they'll get a low score.
    - arihant 11y ago
      This is not SAT unfortunately. Your score and your behaviour are both needed for a license. Besides, in situations like these attendance policy is important. You can't test every single edge case possible on a test. The state has to answer if a license holder says "I did not know X." As a taxpayer, you would question why the hell does a person who does not know X has state license to practice? Unless you're asking every person to recite the whole textbook, the only way to be sure is an attendance policy.

arihant 11y ago

The reason for license is that it can be taken away. In cases of malpractice of selling crap for brokerage, you can't simply uncertify a person. But you can take away their license. It's also the signal to customer that the guy they are dealing with did not simply pass a test, but is actively practising the profession in a manner he is supposed to.

jmckib 11y ago
Maybe I should have defined what I meant by certification. The only difference between a license and a certificate is that you must have a license in order to legally practice, while a certificate is optional. There's no reason that a certificate couldn't be taken away just like a license if, say, someone fails an annual test.
- arihant 11y ago
  No you can't take away a certification. You can make it certified every year. But a certification exists to certify that you tested OK in 2014, for example. You can't take that away because you can't say he did not pass the test. You can outlaw certifications over a year old, but you cannot take the earned certification away. Besides, you cannot take them away mid-year for malpractice. Once you're certified to pass something, you have passed it. You can't go back in time and unpass it.
  - jmckib 11y ago
    You just have a different definition of certification than I do; we're not actually disagreeing on anything substantial.
    - arihant 11y ago
      True. I think we both generically seem to be saying the same thing. The disagreement seem to be on the topic of whether it should be compulsory or not. I do believe that it should be regulated and compulsory. It's much simpler to teach 300 million people to just check for a license than to teach them about how to vet your broker.

mcguire 11y ago

"Alternative title: "Zenefits Scandal Highlights Perils of Excessive Occupational Licensure". What exactly is the purpose of requiring a license for selling insurance? If consumers desire some assurance of quality in their insurance brokers, then certification, not licensure, would be sufficient." Wasn't there just recently an article here complaining about the quality of academic accreditation, or in other words about how those certifications were simply bogus? Let's say you buy insurance. Let's say that after paying premiums for a couple of years, you come down with some dread disease. You contact the insurance company to tell them that you need $737,248.44 or you'll die from your dread disease. They say, "LOL. We don't do that. So sorry." You visit your broker and he says, "I didn't know! I just printed up a certificate and hanged (hung?) out my shingle. Guess you're out of luck." Lawsuit time? Hm. I suppose your estate would still have standing to sue. Unless we've got tort reform as well as licensing reform. Anyway, the neat part is there isn't any consequences to the broker. Sure, you could hit him with fraudulently claiming to be certified, but there are all these other people doing the same sort of thing without any certification at all, so it doesn't sound like a major crime. And of course, we're talking about employment benefits, so you aren't the one picking the broker, your employer is... Here's the question: How would any approach to avoiding that situation not involve something that strongly resembles licensing? (Here's a hint: what is the difference between pulling someone's certification and pulling their license?) "The only justification for licensure over certification is a paternalistic one: consumers are simply too ignorant to choose their own insurance brokers, even if some are certified and some are not. As Milton Friedman said in Chap 9 of Capitalism and Freedom, this argument "amounts to saying that we in our capacity as voters must protect ourselves in our capacity as consumers against our own ignorance."" Actually, that's a pretty fair description of what is going, how it's supposed to work, and why. Here's another quote for you: "The doorstep to the temple of wisdom is a knowledge of our own ignorance," which may or may not be Benjamin Franklin. But I suppose the idea that one may not know something, and that the something might be important, is unappealing to many people. Stop and ponder for a moment how much trust you put into the people around you on a daily basis. And most of them don't even have an incentive and opportunity to screw you. Now, about the 50-odd hour spree of next-clicking... History is path dependent, and any optimal solution to a problem (or apparently optimal, on theoretical economic grounds) may not be reachable given the previous states of the system. Have to click next for 50-hours? Probably because the real, physical class takes 50-ish hours to cover the material. Why have a class at all? Why not just have an exam? (Anyone here familiar with the various industrial certification exams around? Trust 'em?) The exam is also likely pretty simple, otherwise you have no brokers and the insurance sales system becomes very expensive. (Has anyone reading this passed the bar?) So consider it from a liability standpoint: with a class and an exam, a "reasonable person" can be "assured" that the broker has been exposed to the appropriate information and has understood it adequately.

rayiner 11y ago

Milton Friedman's argument is wrong. Licensure requirements are voters delegating due diligence to a trusted body because they acknowledge their own ignorance. I have neither the time nor the inclination to carefully read an homeowner's insurance agreement to see if someone is trying to screw me, or to figure out if a "certification" actually means anything or is some bullshit anyone can hand out. As a voter, I'm happy to put someone else in charge of doing the leg work, so I can buy insurance, buy groceries, eat at a restaurant, etc, and be assured my interests are at least minimally protected.

jmckib 11y ago
> Licensure requirements are voters delegating due diligence to a trusted body because they acknowledge their own ignorance. Certification also amounts to delegating due diligence. Licensure goes a step beyond that by actually forbidding voluntary exchange in certain cases. You are not just delegating due diligence, you are delegating your freedom to make your own choices. > or to figure out if a "certification" actually means anything or is some bullshit anyone can hand out. You still have to do legwork to figure out if a license is just bullshit. Because licensure is almost always controlled by members of the given occupation, there is a tendency for more and more bullshit to creep into licensure requirements over time, stuff that has nothing to do with actual competence, because it creates a barrier of entry into the occupation. Friedman has countless examples in his book.

st3v3r 11y ago

No, that's not an alternative title. Do NOT go around excusing their behavior by claiming they were forced to by "excessive licensing". They knew exactly what they were doing. The responsibility is entirely, solely, 100% on them, and no one else.