This week, ride-sharing company Uber announced it is summarily ending all its business in the state of Kansas.
In a blog titled “Leaving Kansas,” Uber company bloggers said, “Kansas lawmakers chose not to listen to their constituents, and special interests succeeded in securing… a bill that makes it impossible for Uber to operate in the state.”
The Senate voted 35-2 to pass Kansas Senate Bill 117, which would require drivers from any ride-sharing “transportation network company” to have extra insurance for each driver and for drivers to go through an extensive background check before earning the right to pick up passengers.
The bill places the following insurance requirement on each driver: liability of at least $50,000 for death and bodily injury per person, $100,000 for death and bodily injury per incident, and $25,000 property damage.
That’s not too bad.
However, the problem arises when they have a passenger on board. The bill demands the company provide extra insurance whenever a driver is “engaged in a prearranged ride.” This demands a primary liability of at least $1 million for death, bodily injury, and property damage.
As for the background check requirement, the bill says drivers would be subject to investigation by the Kansas Bureau of Investigation and the FBI for criminal history, as well as for a check of their driving records.
The bill prohibits anyone from becoming an Uber driver if they’ve had more than three moving violations in three years, if they were convicted of a DUI, “fraud, sexual offenses, use of a motor vehicle to commit a felony, a crime involving property damage, or theft, acts of violence, or acts of terror.” It also prohibits anyone under the age of 19 from being a driver for the company.
In September 2014, Uber was recruiting approximately 50,000 drivers per month in the United States, up from 20,000 just four months prior to that.
If the company had to add a million-dollar insurance policy for every single one of these new drivers and subject them all to extensive background checks, the company literally could not exist.
Disappointment
On April 20, Governor Sam Brownback vetoed SB 117, which had come to be known as the “Uber Bill,” but the Senate overrode the veto.
“I believe this bill is premature. To overregulate or improperly regulate an emerging industry before the marketplace actors make proper arrangements is to invite more problems, not less,” Governor Brownback said in a letter to the Senate. “I am also calling upon ride-sharing companies, insurers, banks, and credit unions to work with our legislature to resolve their differences. These discussions have already begun among Uber and many major insurance companies. The same should begin with banks and credit unions.”
The governor issued further statements from office when it was announced that SB 117 would pass.
“Kansas should be known as a state that welcomes and embraces innovation and the economic growth that comes with it. Over-regulation of businesses discourages investment and harms the open and free marketplace. Uber, and other innovative businesses, should be encouraged to operate, grow and create jobs here in Kansas,” the governor said.
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Governor Brownback’s disappointment is the polar opposite of two former Nevada governors who appeared in legislative hearings to block the ride-sharing company from setting up shop in Nevada.
Former governor Richard Bryan said Uber was about as safe as hitchhiking under its present rules.
Nevada has also banned Uber, but that state has some of the most rigorous regulations on livery and transportation services in the country.
Despite these regulatory hang-ups, Uber is still one of the most hotly anticipated IPOs of 2015.
In March, the company’s Chief Financial Officer Brent Callinicos stepped down and named no successor. Callinicos helped Uber score more than $5 billion in seed funding and helped it grow to a massive $42 billion valuation, but the rumor has been that he was making way for a CFO with better chops in companies going public.
Uber’s massive valuation and status as a “unicorn” (tech start-up that surpasses a billion-dollar value) are certain to make it a hot ticket, but the relative ease with which local transportation interests can shut it down is absolutely disconcerting.
Good Investing,
Tim Conneally
For the last seven years, Tim Conneally has covered the world of mobile and wireless technology, enterprise software, network hardware, and next generation consumer technology. Tim has previously written for long-running software news outlet Betanews and for financial media powerhouse Forbes.
