California’s recent signing of SB 371 marks significant changes for ridesharing services, promising to make services more affordable while maintaining essential protections for both drivers and riders. For small business owners, especially those that rely on transportation or delivery services, these reforms could reshape their operating costs and customer pricing structures.
At its core, SB 371 is an effort to address one of the ridesharing industry’s most pressing problems: soaring insurance costs. Passengers in California pay the highest fares in the country, with about one-third of all fares allocated to government-mandated insurance. In densely populated areas like Los Angeles, this number rises to almost half. The driving force behind these costs was the outdated requirement for a $1 million uninsured/uninsured motorist (UM/UIM) policy that only applies to rideshare drivers, as opposed to taxis or private vehicles.
“Curbing these excessive insurance requirements is a game changer, as they artificially inflate rates for customers and limit drivers’ earning potential,” an Uber spokesperson said. Not only have these regulations increased costs, they have fostered a culture where minor accidents escalate into costly lawsuits, placing greater burdens on both riders and drivers.
Beginning January 1, 2026, the new UM/UIM coverage will be adjusted to $60,000 per individual and $300,000 per accident, aligning it more closely with other vehicles on California roads. In addition to maintaining $1 million in liability insurance for accidents caused by ridesharing operators, the reform ensures occupational accident coverage to help drivers with medical expenses. This is an important protection given that many drivers operate as independent contractors.
Additionally, small business owners who use car sharing services for logistics can expect cost savings. “Low insurance overhead allows ridesharing companies to pass on cost savings directly to consumers and businesses,” the spokesperson said. These changes could lead to more competitive pricing and could benefit companies that rely on ride-hailing services for deliveries or transportation.
Another notable development is the introduction of AB 1340, which allows ridesharing drivers to organize for improved wages and benefits without sacrificing their independence. This law allows sectoral bargaining to provide better conditions for drivers while maintaining the flexibility guaranteed by existing law, especially Proposition 22.
But understanding the broader implications of these changes is critical for small business owners. The increased availability of affordable ridesharing services is likely to increase consumer spending. This is because people feel more comfortable using these services at affordable prices. Additionally, small businesses may seek partnerships or sponsorships with ridesharing companies to attract customers.
But for small businesses that rely on the gig economy, there are potential challenges. Rideshare drivers can now join organizations that advocate for their interests, which could lead to collective bargaining for better pay. This may impact the operating costs and pricing models of those engaging in such services.
Additionally, while the goals of the reform are to reduce costs and improve driver welfare, the actual implementation and response of the ridesharing market will be a very important area. Changes in regulations could trigger changes in the way drivers approach their jobs, which could increase competition for ridesharing gigs. Small and medium-sized businesses need to stay informed about these dynamics, as they can impact both service availability and operating models.
Ultimately, SB 371 and AB 1340 demonstrate how collaboration between lawmakers, industry stakeholders, and labor groups can lead to meaningful change. By making ridesharing more affordable and adjusting the legal environment for drivers, California is setting a precedent that could influence other states seeking similar reforms. As always, staying informed of these developments will help your small business effectively strategize and adapt in an evolving marketplace.
For more information, you can read the original press release. here.
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