New auto insurance regulations in California target on-demand ride services

auto insurance car

Regulators are introducing new rules that focus on the on-demand ride service sector

auto insurance carCalifornia insurance regulators are considering new rules that target on-demand ride services, like UberX and Lyft. These services represent a certain degree of risk when it comes to auto insurance and many insurers have expressed concerns regarding fraud and other issues that have yet to receive regulatory attention by the state. Similar services in other states have been subjected to the same regulatory focus recently, with some of these services actually being barred from operating in some states due to insurance issues.

Regulations are meant to provide more protection to consumers and businesses

Regulators aim to introduce new rules that would require on-demand ride services to hold $1 million in commercial liability auto insurance, which is meant to take effect the moment the service’s drivers turn on a smartphone application that indicates they are making use of the service. Current regulations stipulate that on-demand ride services must only provide coverage for the time a driver accepts a ride request and when they successfully drop off a passenger.

Regulations could harm the on-demand ride service market

State regulators are also looking to require on-demand ride services to hold $5,000 in medical coverage, $50,000 in collision coverage, and $1 million in uninsured/underinsured motorist coverage. These regulations are meant to protect businesses and consumers alike. Some ride service companies suggest that the new rules do not take consumer needs into consideration, however, and introduce a great deal of financial stress on companies that may not be big enough to comply with the state’s new regulations.

Some companies may not be able to cope with the financial burden of new regulations

UberX, one of the state’s most prominent on-demand driver services, argues that more stringent regulations will harm competition among similar companies. This competition forces businesses to price their services in ways that are attractive to consumers. If these businesses must comply with more costly regulations, they will have to raise the price of their services. Some companies may not be able to adapt, which means that they will not be able to engage consumers as they had been able to in the past.


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