With the implementation of the E20 fuel policy in India in April 2025, approximately 66% of people have opposed its rollout. But before you form an opinion, you need to understand how the E20 fuel policy affects new car insurance and its renewal in India.
The car insurance policies and premium prices will have a major impact due to the E20 fuel policy. It is also possible that the insurance companies introduce specialised add-ons for engines, and restructure their Insured Declared Value (IDV) calculation. Let us understand how and why these changes in the insurance policies will impact you.
What is the E20 Fuel Damage Stress among the Indian Drivers?
India is making a rapid shift towards E20 petrol. This is a petrol variant with 20% ethanol blended into it. Major concerns that Indian drivers have regarding this fuel are its incompatibility with the current engine designs of their vehicles. This is the reason why the drivers worry that the use of this fuel will put strain on their vehicle’s engine and lower their mileage.
There are vehicle manufacturers in India that have come out with their statements certifying that any damage caused by the use of this fuel variant will be covered under the warranty. However, there are various manufacturers that have said that the use of E20 fuel is only allowed in their vehicles, which have been manufactured after April 2023.
According to industry and government analysis, only 2 of the 10 petrol vehicles sold in India over the last 15 years are compliant with the E20 fuel variant. This widespread incompatibility has created significant concern among drivers. Many fear that using E20 in older, non-compliant vehicles could lead to
- Engine strain,
- Higher maintenance costs, and
- Warranties do not fully support long-term damage.
How E20 Fuel Can Reshape Car Insurance Policies in India?
This new type of fuel will impact your vehicle insurance renewal and purchase. Below are 5 major impacts of this fuel use on the motor insurance policies:
Higher Fuel Stress May Influence Insurance Premiums
Introducing 20% ethanol into petrol can affect certain vehicle components, particularly in cars that are not originally engineered for E20 compatibility. Moreover, as ethanol is more corrosive than pure petrol, it can impact parts such as:
- Fuel pumps and injectors
- Gaskets and seals
- Fuel tanks and pipelines
- Carburettor-based systems in older vehicles
For E20-ready vehicles, these risks are reduced but not completely eliminated. Insurers, who determine premiums on the basis of future claim probability and cost, may take into account:
- Higher vulnerability of the engine’s wear off
- Greater risk of breakdowns in older vehicles running on E20
This means it might lead to slightly higher premiums for older models not designed for E20, especially during policy renewal.
Premiums for Older Vehicles May Rise Quickly
Cars manufactured before 2023 may face more stress when running on E20 fuel. Owners of such vehicles could experience:
- More frequent fuel-system maintenance
- Higher repair bills
- Faster deterioration of incompatible parts
This means that the insurers will factor in the above issues into policy renewals by:
- Increasing premiums for older models
- Imposing specific exclusions
- Offering optional (new) riders to cover ethanol-related damages
Therefore, with time, older car owners could see a sudden noticeable jump in renewal costs.
Insurance for New E20-Ready Cars Could Become More Competitive
While older vehicles may see premium hikes, the opposite may be true for new E20-compliant models.
- Automakers are redesigning engines and fuel systems to withstand ethanol-blended fuel.
- These vehicles may show lower failure rates in the long term.
- Insurers may find claims for such vehicles more predictable and manageable.
Thus, premiums for new E20-compatible models could remain stable or even reduce slightly. This will also mean that the insurers will be more competitively pricing their premiums for new vehicles.
Increase in the Number of Specialised Add-ons
The E20 transition could also give rise to new insurance products, such as:
- Add-ons for ethanol-induced corrosion
- Fuel system protection covers
- Engine safeguard policies tailored for E20 usage
These kinds of add-ons will offer consumers peace of mind while giving insurers additional revenue streams.
Insurers May Update IDV Calculations
IDV depends on the age, depreciation, and market value of the car. As E20 becomes standard, the market may place:
- Higher value on E20-compliant cars, and
- Lower value on older cars requiring frequent repairs
This might be the reason why the insurers may revise their IDV calculation methods.
Bottom Line
Overall, the introduction of E20 fuel might pose a slight premium hike for old vehicle owners. However, with the use of appropriate add-ons that motor insurers will most likely introduce in the near future, you can completely protect your car and be worry-free. So, while renewing your car insurance, keep in mind that your insurer factors in your worries regarding E20 fuel use in your vehicle.
