The ride-hailing firms - referred to as transportation network companies in Baker's bill - have angered traditional taxi companies and drivers. They say the companies operate illegally at the expense of their highly regulated industry. Ride-hailing services let people use smartphone apps to book and pay for a private car service.
Under the measure, which needs approval from the House and Senate, all drivers for ride-hailing firms would have to hold permits issued by the Department of Public Utilities and undergo a state background check.
Unregistered drivers would not be allowed on the road, said Daniel Bennett, Secretary of Public Safety. "We will have their names and addresses, and if they are suspected of any malfeasance, we will be able to run that down and check them nationwide, and we'll be sharing that information with law enforcement agencies across the state," Bennett said.
If the legislation is approved, the Public Safety Department would determine what past offenses should automatically disqualify a driver. Fingerprinting of drivers would not be required.
In December, an Uber driver was arrested and charged with kidnapping and sexually assaulting a passenger he had picked up in Boston.
The insurance provision was intended to address potential gaps in coverage for ride-hailing services. The bill would allow the insurance to be purchased by either the driver, the company, or in combination.
Meghan Joyce, Uber's East Coast general manager, applauded the legislation.
"This bill would set into law for the entire industry many of the safety standards that have attracted riders and drivers to ride-sharing, including $1 million of insurance on every ride and rigorous, mandatory background checks for all drivers," Joyce said in a statement.
A union representing Boston taxi drivers said Baker's plan falls short because it does not regulate the number of ride-hailing vehicles that can operate, the fares that can be charged by the services and the minimum wage drivers earn.
"Where is the level playing field? There isn't one," said Donna Blyth-Shaw, a spokeswoman for the Boston Taxi Drivers Association.
Some cabbies, Blyth-Shaw said, have lost 50 percent of their income to ride-hailing services.
Baker said that his administration spoke to taxi representatives while formulating the legislation but that consumers must be allowed to decide between traditional cabs and the newer industry.
"I think people deserve choices, and in the end, I think the market is going to determine which one makes the most sense," he said.
Officials also examined how other states were dealing with similar regulatory issues before announcing the plan, the governor added.
The legislation would not stop cities and towns from imposing additional rules for ride-hailing services, he said. A five-member local advisory commission would be created to help the state adopt final regulations.
Boston Mayor Marty Walsh endorsed the bill as a "step forward in creating regulatory frameworks that incorporate transportation network companies into our existing for-hire transportation ecosytem."
The AP contributed to this report.