2 hours ago
Riders and drivers across California often ask about the factors that determine the price of a ride. Today, we want to shed light on a significant element: the unique and costly insurance mandates placed on ridesharing in the Golden State.
A new, independent study conducted by Berkeley Research Group (BRG) dives deep into California’s requirement that Transportation Network Companies (TNCs) including Uber carry $1 million in uninsured/underinsured motorist (UM/UIM) coverage while a passenger is in the vehicle.
This mandated insurance covers ridesharing drivers and riders for damages caused by an at-fault driver with no or insufficient liability coverage, as well as in the case of hit and runs. It is in addition to the $1 million per accident auto liability coverage that is maintained by TNCs for the period between when a trip is accepted and ends, and the $1 million Occupational Accident Insurance (OccAcc) for driver medical bills, among other benefits.
The BRG study concludes that the UM/UIM mandate is not only an outlier compared to what is required of other drivers in California and in other states, but also a key driver of higher costs for riders.
What Did the Study Find? California’s Insurance Rules Stand Apart.
The BRG study brings several critical points to light:
- Outsized Insurance Mandates for Ridesharing: California’s $1 million UM/UIM requirement for TNCs is exceptionally high. No other vehicles on the road in California, including personal cars, taxis, and ambulances are required to carry UM/UIM.
- Lack of Statistical Justification: BRG’s analysis finds no statistical evidence that California’s roads or drivers are inherently riskier to warrant such a high, specific mandate for ridesharing.
- The Direct Impact on Riders and Drivers: This outsized mandate isn’t just an operational detail; it directly contributes to the price riders pay. Approximately one-third of a rider’s fare in California goes towards covering government-mandated insurance costs. That means on a typical $30 crosstown trip, around $10 of the fare is dedicated to state required insurance. Additionally, more than half of that amount in this example is specifically for this $1 million UM/UIM coverage. That means more than $5 of a $30 trip goes only to the specific UM/UIM mandate.
- A Magnet for Increased Litigation: BRG cites decades of research and current data linking outsized insurance mandates, like California’s $1 million UM/UIM requirement for TNCs, to litigation abuse and waste.
- Existing Protections for Drivers: Uber is required by state law to provide drivers in California with significant coverage through Occupational Accident insurance, which covers medical expenses (up to $1 million), disability pay, and survivor benefits. This study highlights that many aspects of UM/UIM are duplicative of that required Occupational Accident Insurance.
What Could Fairer Insurance Rules Mean for Californians?
The BRG study doesn’t just identify a problem; it points towards a solution. Reforming California’s UM/UIM requirements could unlock significant benefits:
- More Affordable Rides: Reduced insurance overhead could lead to lower, more competitive fares for riders.
- Increased Demand & Driver Opportunities: BRG estimates lower fares could stimulate at least 10% more trips, increasing earning opportunities for drivers.
- Enhanced Road Safety: Studies have shown increased access to affordable ridesharing has positive impacts on road safety, including reductions in alcohol-related traffic incidents.
- A More Efficient and Equitable System: Reforming these rules would mean insurance costs are more reasonably aligned with actual risks, creating a fairer system for everyone.
Moving Towards a More Sensible Solution
At Uber, we believe that regulations should be fair, data-driven, and serve the best interests of the public, riders, and drivers. The findings from the Berkeley Research Group study provide compelling evidence that California’s current UM/UIM insurance mandate for ridesharing is an outlier that contributes to unnecessary costs.
We are committed to advocating for sensible policies that can make transportation more affordable, accessible, and continue to enhance safety on California roads. We believe that by working together, we can achieve a regulatory environment that benefits everyone.
To learn more about the economic impact analysis, the full study was conducted by Paul Wazzan, Jeffrey Klenk, Helmut Klemperer, and William Hamm of Berkeley Research Group (BRG).
For more info on the insurance coverages provided by Uber, see here.