Uber Technologies Inc. (NYSE: UBER) has reached a groundbreaking agreement with California lawmakers on new legislation that is expected to lower ride prices and drive demand, according to analysts at Bank of America (BofA) (NYSE: BAC). The deal, which includes changes to insurance requirements and collective bargaining rights for drivers, could have far-reaching implications for the rideshare industry.

Key Legislative Changes

The agreement centers around two bills:

• AB 1340: This bill allows rideshare drivers to collectively bargain over wages and working conditions while retaining the right to opt out of union membership.
• SB 371: This legislation significantly reduces mandatory insurance coverage for rideshare drivers, lowering the requirement from $1 million per accident to $100,000 per person and $300,000 per accident.

California Governor Gavin Newsom has endorsed the deal, stating that it will “empower hundreds of thousands of drivers while making rideshare more affordable.”

Lower Insurance Costs to Drive Savings

Insurance costs have long been a financial burden for rideshare companies and their customers. BofA analysts estimate that California riders currently pay over $5 per trip to cover insurance costs. A study by the Berkeley Research Group found that 96% of auto claims fall below $100,000, suggesting that the existing $1 million insurance mandate is excessive. Lyft (NASDAQ: LYFT) has disclosed that insurance costs in California can add up to $6 per ride.

The reduced insurance requirements, set to take effect in January 2026, are expected to deliver significant savings for both Uber and its customers. Insurance expenses account for more than half of Uber's cost of revenue, with an even higher proportion in California. Analysts believe these savings will help improve Uber's gross margins and make rideshare services more affordable.

Impact on Drivers and Proposition 22

While the new legislation could eventually lead to higher driver pay and benefits such as healthcare and paid time off, BofA analysts do not foresee a major financial impact until 2027. They estimate that driver earnings could rise by less than 10% under the framework of Proposition 22, which governs gig worker compensation in California.

A Template for Broader Reforms

BofA analysts see California's reforms as a potential model for other large markets. For example, in New York, mandated insurance costs represent 28% of ride prices, compared to under 5% in Massachusetts. In New Jersey, Uber faces a $1.5 million insurance requirement--50 times that of personal drivers. Over time, similar reforms in other states could further reduce ride prices and stimulate demand.

Competitive Edge Against Autonomous Vehicles

The analysts also highlighted the competitive advantage these reforms could provide Uber in the face of growing competition from autonomous vehicle (AV) operators like Waymo. While Waymo's prices in California remain higher than Uber's, the anticipated cost savings from lower insurance requirements could help Uber maintain its edge.

"Long term, insurance reform in California and elsewhere should contribute to lower ride prices," said BofA analyst Justin Post. "Specifically in California, we believe the increased demand from lower prices can drive incremental growth. With AV competition becoming more of a reality in California, lower prices from insurance savings can also help maintain Uber's competitive positioning."

BofA's Outlook on Uber

Bank of America has maintained its Buy rating on Uber shares, citing the potential for lower ride prices to strengthen the company's market position and drive demand. With California accounting for roughly 9% of Uber's gross bookings, the reforms are expected to have a meaningful impact on the company's financial performance.

As the rideshare industry continues to evolve, California's legislative changes could set the stage for a new era of affordability and growth, benefiting both drivers and riders while solidifying Uber's leadership in the market.

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COMTEX_468525164/2927/2025-09-03T13:30:46