TNCs fight for footing in California’s legislature
A recent R Street post by Zachary Cohn laid out three steps that transportation network companies like Uber, Lyft and Sidecar should take to solidify their place in heavily regulated environments. One of his recommendations, to “focus on strengthening government relations in their new and existing cities,” is a lesson that TNCs have yet to learn at the state level here in California. If they fail to understand this soon, both they and the state could be worse off for it.
Many of California’s elected officials hew closely to a narrative about the state’s penchant for acting as an incubator to new and exciting industries. Adventurous at the least, legislators will assume the necessary intellectual and political poses en route to supporting industries they deem exciting. Consider that, in its latest session, the Legislature passed and the governor signed a bill to provide a tax break to for-profit space exploration firms with virtually zero opposition.
While not taking their clients into orbit, TNCs have the benefit of being seen as an “exciting” new industry. Yet they have failed inspire California lawmakers to sponsor or advance legislation on anything like their own terms. Concerns about driver safety and insurance policy gaps, after the death of a young girl in San Francisco, have tempered a full-on embrace of what the new industry can offer. In fact, to date TNCs have played nothing but defense in California’s political arena.
First, they were forced to address a taxi industry-sponsored bill that would have required them to maintain full livery coverage. This proposal would have dramatically increased the cost of doing business and was, with the help of insurers, derailed. Second, they had to address an insurance industry-sponsored bill that codifies the parameters of TNC insurance coverage. Despite their best efforts, TNCs find that the second bill is defining thought and conversation about their industry around the Capitol.
It is understandable that TNCs are concerned that their business model is being totaled. Their concerns are well founded. Frustratingly for them, that is the nature of the market they have entered. Alternative products, specifically tailored to their business, are not yet available and will not be available for some time. In California, under the regulatory purview of Proposition 103, automobile insurance policies are required to undergo a lengthy vetting process before they may be approved by the Department of Insurance.
This places innovators like the TNCs in a difficult situation by forcing them to address two bad hands. On the one hand, the necessary insurance product is unavailable now and will not become available in the near future. On the other hand, stakeholders from other, more established industries are seeking to maintain predictability and strength in their dealings with TNCs and thus have incentive to use the power of the state to paint bright lines around the TNCs.
To transcend their current predicament, TNCs need to stop squandering their structural “excitement” advantage by presenting an adversarial face toward insurers. Instead, TNCs should be seeking common cause with insurers, who hold the bulk of the expertise in dealing with the regulators likely to be responsible for the TNC industry. More specifically, TNCs need to directly engage insurers to assess the risks the new industry poses and to arrive at agreed-upon solutions. TNCs have everything to gain if they can work with insurers, particularly as the insurers seek to make policy and rate filings.
“Strengthening government relations” need not begin and end with policymakers: it should also include engagement within communities of like interest.
