#United States #California #Insurance #Rideshare

California's Insurance Mandate at a Crossroads

A recent comprehensive study from BRG has sparked debate over California's Assembly Bill 2293 (AB 2293), which requires Transportation Network Companies (TNCs) like Uber and Lyft to carry a $1 million uninsured/underinsured motorist (UM/UIM) insurance coverage. The findings raise serious concerns, as they reveal that the costs imposed by this regulation significantly outweigh the benefits.

Excessive Coverage: A Burden for All

One of the chief criticisms of the current insurance mandate is that the $1 million requirement is overly generous, going well beyond what tends to be necessary for typical accident scenarios. In California, data indicates that in the vast majority of personal auto claims, 96% are resolved for less than $100,000. This stark contrast highlights the sufficiency of lower limits, which can alleviate financial strain on drivers and riders alike. Furthermore, the burden of this excessive coverage positions all stakeholders at a disadvantage. Proposed changes could enhance affordability and accessibility in the rideshare sector.

Impacts on Litigation

The fluctuating legal landscape surrounding personal injury claims tied to ridesharing has also been a cause for alarm. High insurance limits open the doors for increased litigation, creating a surge in claims that may be fueled by the potential for large payouts. In fact, approximately 85% of UM/UIM claims in California involve attorneys, and when these claims go to trial, average payouts can soar to over $300,000. For comparison, states like Illinois, which have much lower UM/UIM mandates, show a mere 45% of claims involve lawyers, with average payouts significantly lower, around $30,000; demonstrating that less is often more in terms of legal complexity and costs.

Addressing Public Safety Concerns

The report proposes that re-evaluating this mandate could have positive implications beyond just cost savings. Reducing the UM/UIM coverage to a better-aligned level could lead to lowered fares, stimulating greater usage of TNC services. This, in turn, could alleviate issues of accessibility and even lead to fewer incidents of drunk-driving. BRG's analysis suggests that by halving the insurance costs, ride volumes could increase by nearly 10%, which could potentially translate to a drop in overall traffic fatalities.

A Call for Policy Recalibration

This study underscores an important need for revisiting current insurance policies pertaining to rideshare services. William Hamm, Ph.D., a key author of the report, states, "California's insurance mandates for TNCs are an outlier compared to other states, both in scale and in their economic impact." It’s evident from the data that high coverage levels do not inherently equate to better protection. Instead, they appear correlated with heightened legal expenses and limited affordable transportation options.

Conclusion

BRG’s findings showcase how current insurance requirements are misaligned with real-world risks and economic realities. As California stands at a crossroads regarding rideshare insurance policies, there's a crucial opportunity to reform regulations. Implementing a more balanced approach could lead to enhanced safety, accessibility, and reduced legal pressures, ultimately benefiting the public and the rideshare industry alike.

To explore more about this pivotal study, visit thinkbrg.com for the full report.