India’s motor insurance market underwent a significant transition in FY26, driven by the rapid expansion of electric vehicles (EVs), changing consumer preferences, and the emergence of usage-based insurance models. These findings are outlined in a FY26 motor insurance trends report released by Policybazaar, which analyses customer behaviour and policy data across vehicle segments.
EVs Drive Premium-led Growth
According to the report, electric vehicles emerged as the fastest-growing segment within motor insurance during FY26. EVs are no longer a niche category and are increasingly becoming a high-value, fast-scaling segment with distinct insurance requirements. New EV insurance purchases rose nearly 2.5 times year-on-year, while premium collections increased by around 200%, significantly outpacing petrol and diesel vehicles. The trend reflects both higher EV adoption and elevated average ticket sizes linked to battery systems and advanced vehicle technologies.
Consumers Move Toward Protection-focused Coverage
The report highlights a clear shift in insurance buying behaviour during FY26, with customers increasingly viewing motor insurance as a risk protection product rather than a regulatory necessity. Add-on covers saw strong uptake, led by Roadside Assistance and Zero Depreciation. Other covers such as Engine Protector, Consumables, and Key or Lock Replacement recorded moderate adoption, while Return to Invoice remained a relatively niche choice.
This protection-led approach was most pronounced among buyers of brand-new vehicles. The report notes significantly higher add-on attachment rates at the time of purchase, indicating a preference for comprehensive coverage early in the ownership cycle.
Regional Demand and Vehicle Trends
Regionally, Maharashtra recorded the highest demand for motor insurance during FY26, followed by Uttar Pradesh and Delhi, according to the report. These states continued to account for a substantial share of policy purchases during the year.
In terms of vehicle preferences, SUVs dominated new car insurance choices. The report observes a sustained shift toward compact and mid-size SUVs equipped with higher feature content. At the same time, high-volume hatchbacks continued to form a large part of India’s overall insured vehicle base. In the two-wheeler segment, commuter motorcycles and scooters remained the primary contributors to insurance volumes.
The report also points to growing acceptance of usage-linked insurance in FY26. Pay-As-You-Drive policies were adopted by an estimated 15-20% of customers, particularly urban drivers with lower annual mileage. These customers typically reported usage of 7,500-8,500 km per year and achieved savings of 25-30% compared to standard comprehensive policies.
Industry Outlook
The report concludes that FY26 marks an inflection point for India’s motor insurance sector. The combined impact of rising EV penetration, higher adoption of add-on covers, data-driven underwriting, and usage-based pricing models is reshaping both product design and consumer expectations. This shift from compliance-led purchasing to personalised risk protection is expected to deepen as mobility patterns and vehicle technologies continue to evolve.