San Diego on Monday lowered the insurance coverage cabbies must have from $1 million to $350,000
The move comes with demand for taxis plummeting because of Uber and Lyft ride-hailing apps.
The number of people with taxi permits has fallen nearly 30 percent in two years, from 1,266 to 884.
San Diego is trying to save its struggling taxi industry by allowing operators to carry significantly lower insurance coverage, helping make taxis more competitive with app-based ride services Uber and Lyft.
The City Council voted 6-3 on Monday to shrink San Diego’s minimum required insurance coverage from $1 million to $350,000, a move that essentially reverses an increase from $300,000 to $1 million that the council approved in 2010.
The goal is the survival of the local taxi industry, which has seen demand plummet because of Uber and Lyft. The number of people with taxi permits has fallen nearly 30 percent in two years, from 1,266 to 884.
The change is unlikely to lead to a rash of accidents in which cabbies don’t have adequate coverage, said officials from the Metropolitan Transit System, which regulates the city’s taxi industry.
An actuarial analysis of the last five years shows that the average claim per crash was about $7,000 and that 99.61 percent of crashes caused damage of less than $350,000.
“You can never insure for outlier things that are going to happen,” said Councilwoman Barbara Bry of La Jolla. “I think it’s really important to keep the taxi industry in business.”
Bry noted that unlike taxis, Uber and Lyft don’t guarantee 24-hour service and have no cap on what they can charge, making their rates frequently higher than taxis during surge periods like rainstorms or holidays.
Uber and Lyft, which are regulated statewide by the California Public Utilities Commission, also face less rigorous insurance requirements than taxis in San Diego, MTS officials say.
They need $1 million in coverage, which is typically provided by the company instead of the driver, only when they have been summoned for a pickup or are carrying a passenger.
At other times, such as when the app is open but the driver hasn’t been summoned, their requirements are similar to ordinary commercial insurance: $50,000 per person, $100,000 per incident and $30,000 for property.
The six votes in favor of the softened insurance requirements for taxis included the council’s five Democrats and one of the panel’s four Republicans, Lorie Zapf of Bay Ho.
"Lots of families have lost their livelihoods overnight," said Zapf, explaining why she broke ranks with her Republican colleagues on the issue. "They've lost their ability to be competitive."
Zapf said that many of the city’s taxi drivers are hard-working immigrants, some of whom paid thousands of dollars for taxi medallions that have become essentially worthless.
Another point Zapf made was that San Diego is the only city among the nation’s 10 largest to require as much as $1 million in insurance coverage for taxis. Los Angeles requires $350,000.
Councilman Scott Sherman of Allied Gardens, who cast one of the three “no” votes, said he understood the intent but couldn’t be supportive.
Sherman said taxi operators should form their own groups to control premiums and reduce costs.
He also raised concerns about the city and MTS getting sued after big crashes in which a taxi driver didn’t have enough coverage, but attorneys for the city and MTS said both agencies have immunity because they regulate the industry.
The reduction in minimum coverage comes as insurance premiums for taxi have increased 80 percent in the last six years, including a 35 percent jump that was scheduled to kick in this spring without the reduction from $1 million.
For a typical taxi driver, the annual cost of such insurance has increased from $3,000 in 2010 to $5,500 this year.
"We're not asking for a handout, we're asking to be more competitive in a marketplace," said Tony Hueso, owner of USA Cab.
Adrian Kwiatkowski, leader of the local Transportation Alliance Group, predicted San Diego could be a trendsetter in California, the only part of the country where the $1 million requirement is common.
He said Orange County would likely follow San Diego’s lead, and San Francisco officials recently began analyzing whether to drop their requirement from $1 million.
Kwiatkowski said the insurance rules are just one reason Uber and Lyft are killing the taxi industry.
He said the city’s taxi ordinance is 40 pages, while the state’s is five pages.
"It's absurd," he said. “The taxi industry and other transportation providers are saddled with regulations at the local level, while Uber and Lyft get away with whatever they want because they are regulated by the state. That's why there's such a disparity in market share."
The crisis in the industry comes just a few years after partial deregulation of local taxis came with optimism about higher incomes for drivers and better customer service.
The new city regulations are scheduled for approval by the MTS board on April 12.
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