4 ms·

As a licensed insurance agent and tech person working in insurance, this sort of law is common and is a big part of the ethics portion of the licensing exam. I

As a licensed insurance agent and tech person working in insurance, this sort of law is common and is a big part of the ethics portion of the licensing exam. I honestly don't think it applies here, but I could see how it could be justified.

SilasX 10y ago
Could you explain the dynamics here? What dangerous behavior is this prohibiting, and why? What's the "nightmare scenario"? Edit: Here's an article on the same thing happening in Utah, which explains the law and Zenefit's defense: http://beehivestartups.com/blog/utahs-attempt-shutdown-zenefits-highlights-very-troubling-trend/ http://beehivestartups.com/blog/utahs-attempt-shutdown-zenef...
- mrkurt 10y ago
  Mostly it's to prevent brokers from giving customers kickbacks (either pure money or gifts). When a broker is helping people make decisions about what plans to buy, it seems like a reasonable restriction, although I don't think the intent was to prevent what Zenefits is doing.
  - stale2002 10y ago
    Kickbacks just means "charging customers less money" and "giving customers a better deal than their competitors" and "competing in the free market". The insurance industry is so messed up that they have made it illegal to give customers good deals and have made it illegal to compete. Imagine that a bunch of companies got together and decided that everyone should increase their prices. In the normal world that would be called illegal monopolistic pricing. In the insurance world, charging people less money and giving consumers a good deal is the illegal thing.
    - a_c_s 10y ago
      Kickbacks (especially in the form of gifts) often go to the individuals rather than the company. A broker who gives a 10% discount to a company saves the company money which allows them to get their employees a better plan (or higher profits or whatever). A kickback of steak dinners and free golf for the HR manager is more like a bribe: no benefit accrues to the company itself.
- jhspaybar 10y ago
  Insurance prices are often approved by state regulators. It requires approvals and the state provides backstops and other safeguards. Prices in the insurance industry are pretty controlled. This even goes so far that despite there being a state backstop to many forms of insurance, a broker or agent aren't allowed to even mention this safety net without violating ethics laws. As for "why", I'm not completely sure. My guess here is it's to minimize the chance of the state needing to get involved with bailouts and to reduce competition so that companies don't take on unreasonable risk playing the odds that they'll make it through another year on the happy path without paying claims.
wilde 10y ago
Is it a safeguard to ensure that companies that offer insurance can remain in business to service claims? Or why is this illegal?
stale2002 10y ago
Honest question. Why is charging consumers higher prices the "ethical" thing to do? Giving "kickbacks" is just another word for "charging customers less money". Is the issuance industry so messed up that choosing to not screw over consumers is considered "unethical".
- mrkurt 10y ago
  The health insurance industry is heavily regulated. Typically regulation begets more regulation, it's conceivable that they've limited insurance cos in such a way that the inducement restriction for brokers makes sense. You definitely want insurance companies competing on price, but you may not want insurance brokers arbitrarily giving out rebates. Imagine (and this is totally made up) that the insurance companies give brokers higher commissions at higher volumes; if that were the case, and brokers could give rebates, there are times a broker would push one insurance company's plan over another's simply to hit a sales incentive. That's probably not good for the people buying insurance. Part of the broker's job is to give good advice.
- svachalek 10y ago
  Insurance itself isn't a consumer-friendly product without regulation. It's too easy to make a lot of sales and just disappear when the going gets tough. One bad player can run all the good ones out of business by out-"competing" them. I wouldn't be surprised if there are similar games to play in the insurance broker business but I'm not sure how it's done.
  - icebraining 10y ago
    Wouldn't it make more sense to impose a capital requirement, like on banks? E:g. if you're insuring for $X in total value, you need to at least keep $Y in a fund.
- st3v3r 10y ago
  >Giving "kickbacks" is just another word for "charging customers less money". No, it's not. It's another word for bribing the person in the company in charge of selecting insurance.

SilasX 10y ago

Could you explain the dynamics here? What dangerous behavior is this prohibiting, and why? What's the "nightmare scenario"? Edit: Here's an article on the same thing happening in Utah, which explains the law and Zenefit's defense: http://beehivestartups.com/blog/utahs-attempt-shutdown-zenefits-highlights-very-troubling-trend/ http://beehivestartups.com/blog/utahs-attempt-shutdown-zenef...

mrkurt 10y ago
Mostly it's to prevent brokers from giving customers kickbacks (either pure money or gifts). When a broker is helping people make decisions about what plans to buy, it seems like a reasonable restriction, although I don't think the intent was to prevent what Zenefits is doing.
- stale2002 10y ago
  Kickbacks just means "charging customers less money" and "giving customers a better deal than their competitors" and "competing in the free market". The insurance industry is so messed up that they have made it illegal to give customers good deals and have made it illegal to compete. Imagine that a bunch of companies got together and decided that everyone should increase their prices. In the normal world that would be called illegal monopolistic pricing. In the insurance world, charging people less money and giving consumers a good deal is the illegal thing.
  - a_c_s 10y ago
    Kickbacks (especially in the form of gifts) often go to the individuals rather than the company. A broker who gives a 10% discount to a company saves the company money which allows them to get their employees a better plan (or higher profits or whatever). A kickback of steak dinners and free golf for the HR manager is more like a bribe: no benefit accrues to the company itself.
jhspaybar 10y ago
Insurance prices are often approved by state regulators. It requires approvals and the state provides backstops and other safeguards. Prices in the insurance industry are pretty controlled. This even goes so far that despite there being a state backstop to many forms of insurance, a broker or agent aren't allowed to even mention this safety net without violating ethics laws. As for "why", I'm not completely sure. My guess here is it's to minimize the chance of the state needing to get involved with bailouts and to reduce competition so that companies don't take on unreasonable risk playing the odds that they'll make it through another year on the happy path without paying claims.

wilde 10y ago

Is it a safeguard to ensure that companies that offer insurance can remain in business to service claims? Or why is this illegal?

stale2002 10y ago

Honest question. Why is charging consumers higher prices the "ethical" thing to do? Giving "kickbacks" is just another word for "charging customers less money". Is the issuance industry so messed up that choosing to not screw over consumers is considered "unethical".

mrkurt 10y ago
The health insurance industry is heavily regulated. Typically regulation begets more regulation, it's conceivable that they've limited insurance cos in such a way that the inducement restriction for brokers makes sense. You definitely want insurance companies competing on price, but you may not want insurance brokers arbitrarily giving out rebates. Imagine (and this is totally made up) that the insurance companies give brokers higher commissions at higher volumes; if that were the case, and brokers could give rebates, there are times a broker would push one insurance company's plan over another's simply to hit a sales incentive. That's probably not good for the people buying insurance. Part of the broker's job is to give good advice.
svachalek 10y ago
Insurance itself isn't a consumer-friendly product without regulation. It's too easy to make a lot of sales and just disappear when the going gets tough. One bad player can run all the good ones out of business by out-"competing" them. I wouldn't be surprised if there are similar games to play in the insurance broker business but I'm not sure how it's done.
- icebraining 10y ago
  Wouldn't it make more sense to impose a capital requirement, like on banks? E:g. if you're insuring for $X in total value, you need to at least keep $Y in a fund.
st3v3r 10y ago
>Giving "kickbacks" is just another word for "charging customers less money". No, it's not. It's another word for bribing the person in the company in charge of selecting insurance.