[jhspaybar]

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]

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-zenef...

[mrkurt]

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]

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]

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]

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.

[stale2002]

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]

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.

[fatbird]

In the retail world, there's now far, far less corruption than there used to be. When buyers from Home Depot came to visit my employer, they wouldn't even accept a soda because there was a strict, zero tolerance, no receiving anything from a manufacturer policy.

This was driven initially by Walmart, which has a similar policy, because executives at Walmart realized that if manufacturers were bribing their buyers, the cost of those kickbacks was being built back into the price of the product. By loudly (and actually) having and enforcing a "no taking anything" policy, they could then demand further price reductions. This is now widespread.

A broker offering kickbacks or discounts is recouping the cost somewhere. If the product is the same but they're cheaper by the broker, then it's likely that the product isn't the same in fact--perhaps there's some special rider in the contract, or maybe the broker just knows how to slow-walk or otherwise chip away at claims. The insurance industry is famous for some parties failing to provide the future service you're purchasing on technicalities or just bureaucratic abuse.

In a market where expert assistance is needed, and end users can't fully protect themselves with informed purchasing, requiring parties offering the same service to charge the same price is a way of forcing honest dealing. That's the idea, anyway.

[svachalek]

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]

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]

>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.

[wilde]

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