Uber: Canada deal to lower prices and help drive demand: BofA

Investing.com -- Uber’s (NYSE: UBER) agreement with California on new legislation is set to lower ride prices and boost demand, according to Bank of America analysts.

The deal covers the AB 1340 bill, which allows drivers to collectively bargain over wages and conditions while retaining the right to opt out of unions, and SB 371, which reduces mandatory insurance coverage for rideshare drivers from $1 million per accident to $100,000 per person and $300,000 per accident.

California Governor Gavin Newsom has backed the agreement, saying it “will empower hundreds of thousands of drivers while making rideshare more affordable.”

Insurance costs are a significant burden, BofA analysts said, estimating that California riders pay more than $5 per trip for coverage.

A Berkeley Research Group study found that 96% of auto claims fall below $100,000, making current requirements excessive. Lyft (NASDAQ: LYFT) has disclosed that riders in California pay up to $6 per ride in insurance costs.

The reduced mandate could start delivering savings in January 2026 and help support Uber’s gross margins, as insurance accounts for more than half of its cost of revenue, even higher in California mobility.

Roughly 9% of Uber’s gross bookings come from California, the analysts noted.

While AB 1340 could eventually lift driver pay and benefits such as healthcare and paid time off, BofA does not expect a major financial impact before 2027.

The bank believes potential compensation increases will be smaller than the benefit from lower insurance costs, with driver earnings rising by less than 10% within the framework of Proposition 22.

BofA also sees the California reforms as a potential template for other large markets. In New York, mandated insurance represents 28% of ride costs, compared with under 5% in Massachusetts.

In New Jersey, Uber faces a $1.5 million insurance requirement—50 times that of personal drivers. Over time, analysts expect such reforms to lower prices and drive demand.

The analysts believe that cheaper rides would strengthen Uber’s competitive position against autonomous vehicle operators like Waymo, whose prices in California remain higher than Uber’s.

“Long term, insurance reform in CA and elsewhere should contribute to lower ride prices, and specifically in CA, we believe the increased demand from lower prices can drive incremental demand,” analyst Justin Post said.

With AV (autonomous vehicle) competition (Waymo) becoming more of a reality in CA, lower prices from insurance savings can also help maintain Uber’s competitive positioning,” he added.

BofA maintained its Buy rating on Uber shares.

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