Uber CEO: In California 'about 30%-plus of the average Uber fare is eaten up by insurance'

Dara Khosrowshahi, CEO of Uber, said during the company’s May 7 Q1 earnings call that more than 30% of fares in California are allocated toward insurance costs driven by fraudulent legal practices and system abuse. This situation, he said, makes operations difficult in California and other states.

"California and New Jersey are quite problematic," said Khosrowshahi. "About 30%-plus of the average Uber fare is eaten up by insurance, much of which comes from kind of fraudulent legal practices, abuse of legal practices, staged accidents, et cetera. I don't want to throw out a number, but it is significant."

According to a report from InsuranceBusinessMag, Uber is raising concerns in California where rising insurance costs and fraud-related litigation are putting pressure on the state’s rideshare economy. Although California requires lower liability limits than New Jersey, the prevalence of staged accidents and excessive legal fees has made the market increasingly costly for both drivers and platforms. Uber has joined a coalition urging lawmakers to address abuses in litigation financing and implement stronger fraud prevention measures. The company warns that without reform, high insurance burdens could undermine affordability and limit earning opportunities for drivers.

A report from the U.S. Chamber Institute for Legal Reform highlights the substantial financial impact of California's tort system on its residents. In 2022, the state's total tort costs reached an estimated $72 billion, amounting to $5,429 per household—much higher than the national average. These elevated costs are attributed to factors such as a high volume of litigation and a notable number of large jury verdicts, often referred to as "nuclear verdicts," which are awards exceeding $10 million. The increasing burden of these costs underscores the need for strategic legal reforms to alleviate the financial strain on California households and businesses.

According to the American Tort Reform Association (ATRA), trial lawyers in California spent approximately $238.8 million on over 2.3 million legal services advertisements across the state's 14 media markets in 2023. This marks a 66% increase in spending and a 21% rise in the number of ads since 2019. Notably, more than 75% of these advertisements were for personal injury services, including vehicle and motorcycle accident claims, accounting for 61% of the total ad expenditure. ATRA President Sherman "Tiger" Joyce commented that such aggressive advertising strategies are employed by trial lawyers to attract more clients, thereby enhancing their ability to secure larger settlements and consequently higher contingency fees.

Khosrowshahi has been leading Uber's global operations across more than 70 countries since 2017. Prior to Uber, he was CEO of Expedia where he expanded the company through key acquisitions and mobile innovation, earning recognition as one of Glassdoor’s Highest Rated CEOs. An Iranian-American with a background in engineering and finance, Khosrowshahi is also a board member and advocate for global refugee causes.