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.
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
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:
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:
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:
This means it might lead to slightly higher premiums for older models not designed for E20, especially during policy renewal.
Cars manufactured before 2023 may face more stress when running on E20 fuel. Owners of such vehicles could experience:
This means that the insurers will factor in the above issues into policy renewals by:
Therefore, with time, older car owners could see a sudden noticeable jump in renewal costs.
While older vehicles may see premium hikes, the opposite may be true for new E20-compliant models.
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.
The E20 transition could also give rise to new insurance products, such as:
These kinds of add-ons will offer consumers peace of mind while giving insurers additional revenue streams.
IDV depends on the age, depreciation, and market value of the car. As E20 becomes standard, the market may place:
This might be the reason why the insurers may revise their IDV calculation methods.
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.
