Insurance Business: Uber calls for insurance reforms as fraud, regulations drive up costs

By: Matthew Sellers

Uber is intensifying its campaign for insurance reform, arguing that excessive state-mandated insurance requirements are driving up costs for both drivers and riders. The rideshare giant, already one of the largest insurance consumers in the country, has long voiced concerns over policies that it claims disproportionately impact transportation network companies (TNCs) compared to other commercial vehicles such as taxis and limousines. With ongoing legal battles over alleged insurance fraud and growing costs linked to lawsuit financing, Uber is pushing lawmakers to implement reforms that would ease the financial burden on its drivers and customers.

One of Uber’s main grievances is the significant difference in required insurance coverage for rideshare vehicles compared to personal cars and traditional taxis. In states such as California and New York, TNCs must maintain liability coverage of at least $1 million per trip – far exceeding the requirements for personal vehicles, which are often only mandated to carry around $30,000 in coverage. Additionally, some states require rideshare companies to provide uninsured and underinsured motorist (UM/UIM) coverage, with amounts that are dramatically higher than those required for other road users. In New York, for example, Uber drivers must have $1.25 million in UM/UIM coverage, compared to just $50,000 for private vehicle owners. In New Jersey, the requirement is even steeper, with a $1.5 million UM/UIM mandate – 50 times what is required for personal vehicles.

These high coverage requirements result in increased operating costs for Uber, which are ultimately passed on to riders. The company estimates that in states like California and New Jersey, nearly a third of a rider’s fare goes toward state-mandated insurance costs. Meanwhile, states with more moderate insurance regulations, such as Washington, D.C., and Massachusetts, allocate less than 5% of rideshare fares to insurance expenses. Uber argues that this discrepancy creates an unfair financial burden on both its drivers and customers, making rideshare services less accessible and profitable.

Adding to Uber’s frustrations is what it describes as legal exploitation of the high insurance requirements. The company recently filed a racketeering lawsuit against a network of law firms, doctors, and clinics that it alleges have staged fake car accidents and pushed unnecessary medical procedures to exploit New York’s no-fault insurance policies. According to Uber’s lawsuit, this scheme involved fraudulent medical claims, some of which included invasive surgeries such as spinal fusions for pre-existing or exaggerated conditions. The company claims that these fraudulent cases contribute to higher insurance premiums, further inflating the cost of rideshare services.

Uber is not alone in its concerns. New York’s largest taxi insurer, American Transit Insurance Company (ATIC), is also facing financial trouble, with regulators investigating its solvency after reporting approximately $700 million in net losses in 2024. ATIC has attributed a significant portion of its financial struggles to widespread fraud in the insurance market, similar to the schemes outlined in Uber’s lawsuit. The insurer has responded by filing its own $450 million racketeering lawsuit against medical providers and attorneys accused of exploiting the no-fault system.

Uber’s insurance reform push also extends to broader legal issues, particularly the growing influence of third-party litigation financing. The company has joined a coalition advocating for stricter oversight of lawsuit lenders, arguing that unchecked legal funding has contributed to skyrocketing insurance costs. The coalition, known as Consumers for Fair Legal Funding (CFLF), is calling for greater transparency in lawsuit lending practices, including interest rate caps and disclosure requirements. Uber officials argue that litigation financing has fueled an increase in personal injury lawsuits against the rideshare industry, leading to higher settlements and, in turn, higher insurance premiums.

The debate over insurance reform has significant implications for Uber’s business model, particularly in states where insurance costs are rising faster than the platform’s ability to offset them through fare adjustments. Uber CEO Dara Khosrowshahi has publicly stated that reducing insurance costs is a top priority, particularly in California, where he says overregulation has made it difficult to operate profitably. In response, Uber has ramped up lobbying efforts at both the state and federal levels, advocating for policies that would lower liability coverage requirements and introduce measures to combat fraudulent claims.

Despite Uber’s push for reform, critics argue that the company’s focus on lowering insurance costs could come at the expense of consumer protection. Opponents of Uber’s proposals say that reducing insurance coverage requirements could leave accident victims with fewer options for financial recovery. They also argue that Uber’s claims of legal exploitation should be addressed through better enforcement of existing fraud laws rather than through sweeping deregulation.

As the debate over rideshare insurance intensifies, lawmakers face increasing pressure to find a balance between protecting consumers and ensuring that transportation services remain affordable and accessible. With lawsuits and legislative battles on the horizon, Uber’s campaign for insurance reform is likely to remain a focal point of discussions in the coming months.