India’s motor insurance market witnessed strong growth in FY26, led by rising adoption in non-metro cities and a sharp surge in electric vehicle (EV) insurance demand.
According to a motor insurance trend analysis by Policybazaar, the car insurance market recorded an 8% year-on-year growth during FY26, while two-wheeler and commercial vehicle insurance segments grew by 11% and 13%, respectively.
Non-metro India emerges as key growth driver
The report highlighted that non-metro markets emerged as the biggest driver of insured vehicle growth during the year.
While metro cities registered an 8% growth in insured cars, non-metro regions recorded a significantly higher 15% growth, reflecting increasing insurance awareness and digital adoption in smaller cities and towns.
Tier-2 and Tier-3 cities now contribute nearly 77% of the overall insured car market, up from 75% in the previous year, indicating a widening reach of motor insurance beyond India’s major urban centres.
EV insurance sees explosive growth
A major trend during FY26 was the rapid expansion of EV insurance adoption.
Policybazaar said EV insurance policies surged 670% between 2025 and 2026, making EVs the fastest-growing segment within the online motor insurance market.
The company attributed the sharp rise to increasing EV adoption, growing consumer awareness around sustainable mobility and rising demand for specialised insurance products designed for electric vehicles.
Telangana and Maharashtra lead growth
Among states, Telangana emerged as the fastest-growing market for car insurance adoption with a 30% year-on-year increase in insured cars.
Meanwhile, Maharashtra continued to dominate India’s EV insurance market, with Mumbai and Pune emerging as key growth hubs.
The state accounted for 8% of all insured EV cars in India during FY26, according to the report.
Petrol vehicles continue to dominate
Petrol-powered vehicles continued to dominate India’s insured vehicle mix, accounting for 68.3% of all insured vehicles in FY26.
Diesel vehicles held a 24.7% share, driven largely by utility-focused and long-distance vehicle usage.
Alternative fuel vehicles also gained traction during the year. CNG vehicles accounted for 5.8% of the insured vehicle base, supported by rising fuel prices and growing preference for cost-efficient mobility solutions.
Electric vehicles currently contribute 1% of the insured vehicle mix, while LPG-powered vehicles account for 0.2%.
Minor collisions remain top claim category
The report noted that minor collision-related damages continued to remain the most common reason for motor insurance claims in metro cities.
Dense traffic conditions and close vehicle proximity during peak commuting hours were identified as the primary factors driving such claims.
Mature and consumer-aware phase
Policybazaar, Head of Motor Insurance, Paras Pasricha said, “India’s motor insurance market is entering a more mature and consumer-aware phase. The strongest momentum is now emerging from non-metro India, EV-focused insurance needs, long-term comprehensive plans, and add-on-driven customisation.”
He added, “As vehicle ownership expands deeper into Tier-2 and Tier-3 India and newer mobility formats gain traction, we remain focused on modular, digitally enabled, and affordability-led protection solutions.