Car services are licensed by the state instead of the city, and are not subject to medallion restrictions. However, they cannot legally make street hails.
If Uber is operating as a taxi, they should have to get medallions just like every other taxi company. If they, or anyone else doesn't like the taxi system in SF, it's possible to change it, assuming you can convince enough voters... It's not all that hard to get a proposition on the ballot in SF. There were 7 propositions in our last election, and that's on the low end for SF.
Fundamentally, what I want is for simple rules to exist that don't interfere with new business models and serve to align the interests of businesses with society as a whole. To mitigate the impact of corporate deals, each driver could be required to apply for insurance individually with the insurer of their choice and that the employer pay it (or not hire the driver if it's too much). This would allow competition to do its job.
My point is, by delegating regulation of cabs to the insurance markets, you don't make the market any more transparent or efficient; instead, you cede it to private businesses who can make arbitrary decisions with no oversight at all.
Crappy oversight is better than no oversight.
I don't care about oversight. I care that the taxi I get in to doesn't crash.
I don't have a lot of faith that regulators will do a good job reducing the probability of that outcome. I think they're likely to be corrupt, incompetent, apathetic or some combination of the three.
I do have a lot of faith that insurance companies will do a good job maximizing their own profits. Those that fail to do so will cease to exist. If we can tie insurance company profits to my taxi not crashing, I think they'll do a near-optimal job of reducing the probability of that outcome.
I agree that $1M seems low for a taxi. That doesn't even cover one wrongful death.
It would seem that the good people of San Francisco voted to require medallions and to impose regulation on taxi services.