Year-end 2025: How motor insurance evolved with EVs, add-ons, and PAYD

EVs, smarter covers and usage-based policies shaped motor insurance

This year marked a quiet but decisive shift in how Indians approached motor insurance. What was long treated as a compliance exercise began to look more like a conscious financial decision, shaped by the rise of electric vehicles (EVs), wider use of add-ons, and the growing acceptance of usage-based policies.

 

Industry data from Policybazaar shows that buyers increasingly prioritised protection, personalisation, and value for money over bare-minimum covers.

EVs move from niche to mainstream

Electric vehicles emerged as the standout growth driver for motor insurance this year. Once seen as a small, experimental segment, EVs are now becoming a high-value category with distinct insurance needs, including battery protection and higher repair costs.

 

 

New EV motor insurance purchases grew nearly 2.5 times year-on-year, while premiums surged by around 200 per cent. This stood sharply in contrast to petrol and diesel vehicles, which recorded sub-10 per cent growth in policy purchases and about 30 per cent growth in premiums. The data reflects both rising EV adoption and a higher average ticket size for EV policies.  ALSO READ | North leads in motor insurance claims; EV repair may cost Rs 39,000: Report

Protection-first buying gains ground

A clear behavioural shift was visible in how customers selected their covers. Insurance was no longer seen only as mandatory documentation but as active financial protection.

Add-ons saw strong traction during the year: 

• Roadside assistance was selected by 74 per cent of buyers
• Zero depreciation cover by 60 per cent
• Engine protector, consumables, and key or lock replacement by about 25 per cent each
• Return to invoice (RTI) remained relatively niche at 12 per cent

The trend was even more pronounced among buyers of new vehicles.

New cars drive higher add-on adoption

For new vehicles, attachment rates for add-ons were significantly higher. Zero depreciation cover was chosen by 96 per cent of new car buyers, followed by roadside assistance at 83 per cent. Consumables by 74 per cent, RTI at 67 per cent, and engine protector by 61 per cent also saw strong uptake, underlining a preference for comprehensive protection in the early ownership years.

SUVs dominate, states show strong demand

SUVs and compact utility vehicles continued to dominate new car insurance choices. Models such as Tata Nexon, Mahindra XUV 3XO, Mahindra XUV700, Hyundai Creta, and Tata Punch featured prominently among newly insured vehicles.

 

Geographically, Maharashtra recorded the highest demand for motor insurance in the year 2025, followed by Uttar Pradesh and Delhi.

Pay-as-you-drive goes mainstream

Usage-linked insurance moved beyond experimentation. Around 15-20 per cent of customers opted for pay-as-you-drive policies, typically declaring annual usage of 7,500-8,500 km. These buyers achieved savings of 25–30 per cent compared with standard comprehensive plans, making such policies particularly attractive for urban, low-mileage drivers.

 

“This year marked a clear inflection point for the Indian motor insurance industry,” said Paras Pasricha, head-motor insurance, Policybazaar.

 

“Customers are moving beyond compliance-led buying to smarter, personalised risk-protection choices, whether through EV insurance, higher add-on adoption, or pay-as-you-drive models.”

 

Together, these trends suggest that motor insurance in India is becoming less about obligation and more about aligning cover with how people actually drive and live.