A California law that reduced Uber’s required insurance coverage is facing new scrutiny after a consumer advocacy group accused the ride-hailing company of withholding key information from lawmakers during last year’s debate.
Consumer Watchdog says Uber failed to make clear to legislators that it largely insures itself through a subsidiary, even as the company argued that insurance mandates were driving up fares for riders and costs for drivers. The law, Senate Bill 371, lowered Uber’s required uninsured and underinsured motorist coverage from $1 million to $60,000 per person and $300,000 per incident.
The issue matters to riders and drivers across Southern California, where Uber is widely used for commuting, airport trips, medical appointments and nightlife transportation. During legislative hearings, Uber told lawmakers that state-required insurance was a major factor in ride costs, particularly in Los Angeles County.
Ramona Prieto, Uber’s director of public policy, told the Assembly Insurance Committee last July that government-mandated insurance accounted for roughly 45% of ride-hailing fares in Los Angeles County and about one-third of fares elsewhere in California. She said those costs were being passed on to people who depend on rideshare service.
But Consumer Watchdog’s May report, based on Uber’s public financial filings, found that nearly 95% of the company’s risk is insured by Aleka Insurance, an Uber subsidiary. The group also said Uber’s insurance reserves doubled from 2023 to 2025, reaching $12.46 billion.
Uber spokesperson Zahid Arab denied that the company misled lawmakers, saying legislators understood that California’s rideshare insurance requirements were unusually costly and were increasing expenses for both riders and drivers.
Assemblymember David Alvarez, a Chula Vista Democrat, said he was not aware Uber largely self-insures because that information was not disclosed to the committee. In an emailed statement, Alvarez said the proper level of Uber’s reserves is an actuarial question, but whether lawmakers received a clear picture of where riders’ insurance dollars were going before voting on the bill is “a separate, and more troubling, question.”
The new law includes disclosure requirements and calls for a study of its effects. Alvarez said he hopes that review will examine how captive-insurance structures, such as Uber’s arrangement with Aleka, affect rate-setting for companies like Uber so future decisions are made with fuller information.
State Sen. Christopher Cabaldon, the Napa Democrat who authored the law, declined to comment through a spokesperson.
CalMatters contacted several lawmakers involved in the bill’s consideration. Some did not respond, and none agreed to discuss whether they knew about Uber’s self-insurance structure or whether they planned to question the company about Consumer Watchdog’s findings. A spokesperson for Assemblymember Mia Bonta, a Bay Area Democrat, said her office had asked Uber about the report and that the company dismissed it as not credible while being “less than forthcoming.”
Campaign finance records in the CalMatters Digital Democracy database show Cabaldon has received a campaign contribution from Uber. Five of eight lawmakers contacted by CalMatters, including Alvarez, also have received Uber contributions. Bonta has not.
The insurance bill was linked to another major labor measure that allowed ride-hailing drivers to unionize. Consumer Watchdog also said Uber misrepresented the insurance issue to unions. The Service Employees International Union California did not provide a response. Lorena Gonzalez, head of the California Labor Federation and a former state lawmaker, said she was not surprised by the allegation, citing her long history of conflict with the company over labor issues.
Consumer Watchdog argued in its report that Uber’s nearly $12.5 billion in reserves is far more than necessary. The group estimated the company would need between $4.5 billion and $5.4 billion, based on the number of rides Uber provided last year and California commercial auto insurance costs. Unlike profits, insurance reserves are not taxed.
The group also said Uber has moved about $4 billion of its insurance reserves into cash over the past couple of years, citing the company’s financial filings.
Arab rejected the report’s conclusions, saying Consumer Watchdog was treating speculation about complex insurance accounting as fact. He said Uber’s reserves are actuarial estimates of potential unpaid losses and related expenses.
Ben Armstrong, an actuary who reviewed Uber’s filings for Consumer Watchdog, said Aleka functions as a captive insurer, meaning it is a wholly owned subsidiary that allows Uber to manage its own insurance risk, profits and investments with limited public transparency. Armstrong said he does not have access to the kind of financial detail typically available for other insurers, but the filings suggest Uber may be reserving far more than it needs.
Large companies often use captive insurance arrangements. Lyft and DoorDash also have insurance subsidiaries, according to public filings with the U.S. Securities and Exchange Commission. As of the end of last year, Lyft reported about $2.2 billion in insurance reserves and DoorDash about $1.1 billion.
Opponents of SB 371 warned during the legislative process that reducing coverage would weaken protections for passengers and drivers if an Uber vehicle is struck by an uninsured or underinsured motorist. Robert Herrell, executive director of the Consumer Federation of California and a former deputy commissioner at the state Department of Insurance, opposed the bill and said Uber has long sought to lower its costs by reducing insurance obligations.
The state law is not Uber’s only effort to reduce liability. The company also qualified a proposed initiative for the November ballot that would limit attorney contingency fees and recovery of medical costs in California car crash cases. Consumer Watchdog, attorney groups and some medical providers opposed the measure. Uber has agreed to withdraw it if lawmakers approve a compromise bill.
In Congress, California lawmakers are divided over another proposal involving ride-hailing liability. Rep. Vince Fong, a Bakersfield Republican, introduced language in May that would override state laws holding companies such as Uber responsible for harm to people or property connected to rideshare trips. Fong described the proposal as an affordability measure, saying companies are facing frivolous lawsuits that drive up insurance costs.
Rep. Derek Tran, a Democrat from Cypress in Orange County, sent a letter this month with 33 other California Democratic members of Congress urging House leaders to remove the provision from a major transportation and infrastructure bill. The lawmakers warned that the language could sharply limit legal recourse for victims in injury, sexual assault and fatality cases involving rideshare companies.
Fong’s office did not respond to questions about the opposition from other California lawmakers.
Uber says California riders are already saving millions of dollars under the new insurance law, though the company has not provided documentation. It is required to submit a formal report on savings to the governor and Legislature by Feb. 1, 2027.
Third-party data does not yet show a broad drop in fares. Gridwise, a company that provides an app used by rideshare drivers to track earnings and expenses, reported that average California customer fares so far this year were slightly higher or roughly the same as last year in most months. The exception was May, when the average fare per mile was $4.67, down from $4.70 the previous May. Gridwise says its data is based on hundreds of millions of trips.
The law also directs the state Department of Insurance to work with the California Public Utilities Commission on a study of the effects of lowering the required insurance coverage. That report is due by Dec. 31, 2030.
Original source: CalMatters
