The First Quarter includes enforcement actions during the months of January, February and March of this year.
Each quarter, the Division of Insurance publishes a list of the enforcement actions it has taken against licensed Resident and Non-Resident Producers. The total fines assessed often vary depending on
Fines imposed during this Quarter totaled $300,700
The First Quarter of 2018 saw an substantial increase in the amount of fines, even though there were only a total of four actions taken during this quarter. The reason for this huge increase is mainly due to the Division’s actions with respect to the former insurtech start-up Zenefits.
As a result of the Division’s Settlement Agreement with Zenefits, the total amount of fines imposed during the First Quarter of 2018 already has surpassed all of the fines imposed during 2017.
More about the largest fine this Quarter…
As mentioned above, the fine against Zenefits was not only the largest fine of the first quarter of 2018, but also one of the larger fines every imposed by the Division. In comparison, the largest fine of 2017 occurred during the First Quarter of 2017, when the DOI imposed a $75,000 fine against America Pet Insurance for Unlicensed Activity.
For those readers that are unfamiliar with Zenefits, it was once one of the hottest insurtech start-ups around. Formed in 2013, the company’s idea was to take over all the human resource functions of small to medium-size companies. Zenefits provided these companies free human resource software which would allow the insurtech start-up to integrate the companies’ existing human resource and payroll systems and simplifying the processes of hiring, paperwork, signing up for payroll, figuring out taxes and deductions, and enrolling in insurance or benefit plans.
Zenefits profit model came from its status as a licensed insurance broker in all 50 states. Its income resulted from commissions on the health insurance and employee benefit plans it sold based upon its human resource software through its employees licensed as insurance agents.
As many of our readers may remember, even though Zenefits was able to raise an amazing amount venture capital, the company’s rebating, licensing violations, mismanagement, and failure to understand insurance complexity stopped Zenefits’ in its tracks leading to a myriad of fines and legal problems as evidence in the Division’s action against in January 2018.
For those interested in learning more about Zenefits, please refer to Agency Checklists’ September 2017 article entitled, “Zenefits Raised $583 Million To Disrupt Insurance Industry Now Has Stopped Selling Insurance.”
Fines involving Hearing Officer Decisions
Aside from the Zenefits Settlement Agreement, there was only one other fine that was imposed as a result of Division of Insurance hearing.[pullquote]The DOI Special Investigations Unit was involved in only four investigations during the first quarter of 2018[/pullquote]
On January 22, 2018, the Division of Insurance Hearing Officer Kristina A. Gasson issued a decision revoking the insurance producer license of Glenn Paul Pearson (“Mr. Pearson”) of Whitman, Massachusetts. Hearing Officer Gasson also ordered Mr. Pearson, under the provisions of Massachusetts General Laws Chapter 175, § 166B (“M.G.L. c.”) to dispose of any interests he might have as a proprietor, partner, stockholder, officer, or employee of any licensed Massachusetts insurance producer.
Under this order, Mr. Pearson will have to sell his interest in the CHC Insurance Agency located at 930 Crescent St, Brockton. Also, the hearing officer fined Mr. Pearson $500.00 for failing to report a federal criminal proceeding as required under M.G.L. c. 175, §162V(b), a statute requiring a producer to report to the Commissioner any criminal prosecution taken against him or her in any jurisdiction.
For those interested in reading more about Mr. Pearson’s case, please refer to Agency Checklists’ January 2018 article entitled, “Producer License Revoked For Failing To Report Guilty Plea On Stealing $260 Thousand in Benefit Checks From Disabled Veterans.”
A look at the cases published during the Fourth Quarter
In addition to the cases highlighted above, the following is a complete list of the Administrative Actions conducted and reported during the First Quarter of 20:
- Licensee & Type of Case: Non-Resident Producer
- Date: February 14, 2018
- Allegations: Trustworthiness; License Revoked By Other State; Failure to Report Administrative Action
- Disposition: Consent Agreement
- Fine: N/A
- Licensing Action: Revocation; Cease & Desist
- Licensee & Type of Case: Non-Resident Producer
- Date: January 26, 2018
- Allegations: Unlicensed Activity
- Disposition: Settlement Agreement
- Fine: $200
- Licensing Action: Cease & Desist
- Licensee & Type of Case: Glenn Paul Pearson
- Date: January 22, 2018
- Allegations: Violation of Insurance Laws; Felony Conviction; Trustworthiness; Failure to Report Criminal Prosecution
- Disposition: Hearing Officer Decision
- Fine: $500
- Licensing Action: Revocation; Cease & Desist
- Licensee & Type of Case: Your People d/b/a Zenefits FTW Insurance Services
- Allegations: Unlicensed Activity; Violation of Insurance Laws; Paying Commission to Unlicensed Producers; Trustworthiness; Accepting Business from Unlicensed Individuals
- Disposition: Settlement Agreement
- Fine: $300,000
- Licensing Action: Cease & Desist
More about the Division of Insurance and its SIU unit…
While the primary mission of the Division of Insurance is “…to monitor the solvency of its licensees in order to promote a healthy, responsive and willing marketplace for consumers who purchase insurance products” a major part of that mission involves insurance enforcement. The DOI engages in a variety of administrative actions throughout the year in order to ensure that the insurance industry and its representatives maintain a just and healthy marketplace.
In the ordinary course of the Division of Insurance regulating the Massachusetts insurance industry, the Division’s Special Investigation Unit will pursue allegations of misconduct against any persons licensed by the DOI including:
- insurance producers;
- insurance advisers; public adjusters;
- reinsurance intermediaries;
- viatical loan brokers and providers;
- viatical settlement brokers and providers;
- insurance companies; health maintenance organizations; and,
- self-insurance groups.
As part of its investigation, the Division’s Special Investigation Unit may interview witnesses, question licensees, demand and review documentary evidence supporting allegations of unfair methods of competition or unfair trade practices or any other violation of the insurance law.
If a specific investigation warrants further action, egregious cases may result in a referral to the Attorney General’s office. In less serious cases the Division independently may negotiate settlements or request the Commissioner or his deputies to initiate an administrative proceeding before a hearing officer, issue a cease and desist order or compel written compliance programs. In more egregious cases, a licensee’s conduct may warrant sanctions including license revocations or suspensions along with restitution and possible fines.
To learn more about avoiding enforcement issues, you may be interested in Agency Checklists’ May 2, 2011 article “One Way to Avoid Large Fines for You & Your Agency.”
