California’s recent signing of SB 371 signals a significant change for rideshare services, promising to make them more affordable while maintaining essential protections for drivers and riders alike. For small business owners, particularly those relying on transportation or delivery services, these reforms could reshape operational costs and customer pricing structures.

At the heart of SB 371 is the effort to address one of the most pressing issues in the rideshare industry—soaring insurance costs. Passengers in California have been bearing some of the highest fares nationwide, with approximately one-third of every fare allocated to government-mandated insurance. In densely populated areas like Los Angeles, this figure climbs to nearly half. The driving force behind these costs was an outdated requirement for a $1 million Uninsured/Underinsured Motorist (UM/UIM) policy, exclusive to rideshare drivers, unlike taxis or personal vehicles.

“Curbing these excessive insurance requirements is a game-changer. They artificially inflate fares for customers and limit earning potential for drivers,” said an Uber spokesperson. This regulation has not only increased costs but also facilitated a culture where minor accidents escalate into costly lawsuits, further burdening both riders and drivers.

Starting January 1, 2026, the new UM/UIM coverage will be adjusted to $60,000 per individual and $300,000 per accident, aligning more closely with other vehicles on California roads. Along with maintaining a $1 million liability insurance for incidents caused by rideshare operators, the reforms guarantee occupational accident coverage to assist drivers with medical bills, a critical safeguard considering many drivers operate as independent contractors.

Moreover, small business owners who use rideshare services for logistics can anticipate reduced costs. “With lower insurance overhead, rideshare companies can pass savings directly to consumers and businesses,” the spokesperson noted. This change could lead to more competitive pricing, benefiting companies relying on rideshare services for deliveries or transportation.

Another notable development is the introduction of AB 1340, which empowers rideshare drivers to organize for improved pay and benefits without sacrificing their independence. This law allows for sectoral bargaining, which can lead to better terms for drivers while still honoring the flexibility guaranteed by existing legislation, notably Prop 22.

But understanding the broader implications of these changes is crucial for small business owners. A rise in the availability of affordable rideshare services will likely stimulate increased consumer spending, as people may feel more comfortable using these services if they are cheaper. Additionally, small businesses could explore partnerships or sponsorships with rideshare companies to attract customers.

For small businesses dependent on the gig economy, however, there are potential challenges. Rideshare drivers now have the option to join organizations that advocate for their interests, which could result in collective bargaining for better pay—an aspect that could influence operational costs and pricing models for those who engage such services.

Furthermore, while the reforms aim to lower costs and improve driver welfare, the actual implementation and response from the rideshare market will be a critical area to watch. Changes in regulation may spark a shift in how drivers approach work, leading to a possible increase in competition for rideshare gigs. Small businesses should stay informed about these dynamics, as they could impact both the availability of services and operational models.

Ultimately, SB 371 and AB 1340 illustrate how collaboration among lawmakers, industry stakeholders, and labor organizations can lead to meaningful change. By making rideshare services more affordable and adjusting the legal landscape for drivers, California is setting a precedent that could influence other states looking for similar reforms. As always, keeping a pulse on these developments can empower small businesses to strategize and adapt effectively in an evolving marketplace.

For more detailed information, you can read the original press release here.

Image via Envato

This article, “California Passes SB 371 to Cut Rideshare Insurance Costs, Benefit Drivers” was first published on Small Business Trends