Motor Insurance experiences shift in user behavior, EV insurance rise 2.5X

The electric vehicle (EV) segment has emerged as the fastest-growing category in India’s motor insurance market in FY26, according to a recent report by Policybazaar. The surge reflects a clear shift in consumer behaviour, with buyers increasingly opting for usage-based insurance models and protection-focused coverage.

The report highlights that new EV insurance purchases grew by more than 2.5 times year-on-year, while premium collections rose by nearly 200%, significantly outpacing the growth seen in petrol and diesel vehicles. This trend indicates that EVs are no longer a niche product but a rapidly expanding segment, driven by higher vehicle and repair costs associated with advanced technology and battery systems.

Consumers Prioritise Protection Over Compliance

The findings show that customers are now viewing motor insurance as a safeguard against financial risk rather than merely a legal requirement. Roadside assistance and zero depreciation emerged as the most preferred add-on covers. While Return to Invoice remained relatively niche, add-ons such as Engine Protector, Consumables Cover, and Key or Lock Replacement witnessed strong adoption.

This protection-first mindset was most evident among buyers of new vehicles. Add-on attachment rates were significantly higher at the time of purchase, suggesting that customers prefer comprehensive coverage early in the ownership cycle.

Regional and Vehicle Trends Shape Demand

Regionally, Maharashtra recorded the highest demand for motor insurance policies during FY26, followed by Uttar Pradesh and Delhi, which together accounted for a substantial share of total policy purchases.

 In terms of vehicle preferences, SUVs dominated new car insurance sales, with growing demand for compact and mid-size models equipped with advanced features. Hatchbacks continued to represent a large share of India’s insured vehicles, while commuter motorcycles and scooters remained the primary contributors to insurance volumes in the two-wheeler segment.

Usage-Based Insurance Gains Traction

The report also notes increasing adoption of usage-linked insurance plans. Around 15–20% of buyers opted for pay-as-you-drive policies, particularly urban users with lower annual mileage. These customers typically reported driving 7,500–8,500 kilometres per year and achieved cost savings of 25–30% compared to traditional comprehensive policies.

Industry Outlook

According to Policybazaar, rising EV adoption, data-driven underwriting, higher add-on penetration, and usage-based pricing are collectively reshaping motor insurance product design and customer expectations. As vehicle technology and mobility patterns continue to evolve, the shift from compliance-led purchases to personalised risk protection is expected to accelerate further.