India’s electric vehicle (EV) revolution is no longer on the horizon—it’s already here. With a market now valued at over $100 billion and growing rapidly, the EV segment is not only reshaping the automotive landscape but also sparking significant changes in related industries, especially insurance.

As consumers shift towards EVs due to rising fuel prices, growing environmental awareness, and government incentives, the insurance sector must evolve in tandem. The relationship between EVs and insurance is becoming more important than ever, demanding tailored products, tech-driven solutions, and consumer education.

A rapidly growing market

According to the IEA Global EV Outlook 2024, global EV sales rose by 25% in Q1 2024 compared to the same period last year. India’s EV sector is contributing strongly to this trend, as the country sets an ambitious target of 30% EV penetration by 2030.

This dramatic shift toward electric mobility not only impacts auto manufacturers and consumers but also challenges the traditional insurance industry to reimagine how it assesses and manages risk.

Unique insurance needs of EVs

Insuring an EV isn’t the same as insuring an internal combustion engine (ICE) vehicle. EVs are powered by complex technology, including advanced batteries and power systems. This makes the cost of repairs potentially higher and more specialized, which in turn affects insurance premiums.

Key concerns for insurers include

• Costly battery replacement or repair
• Complex vehicle electronics
• New risks, such as EV fires
• Unique parts and limited repair infrastructure
• Many insurance providers are now offering EV-specific products such as:
• Battery coverage
• Private charging station protection
• Personal accident cover for drivers and passengers
• Roadside assistance with EV-compatible services

Technology is the game-changer

Insurers are beginning to leverage digital tools to better understand EV usage and offer smarter policies. Technologies like telematics, IoT sensors, and AI-driven analytics are transforming the way risk is assessed. These tools help insurers track:

• Driving habits (speed, braking, acceleration)
• Charging patterns
• Battery performance
• Overall vehicle usage
• Using this data, insurance providers can offer usage-based insurance (UBI) options like
• Pay As You Drive (PAYD)
• Pay How You Drive (PHYD)

These models reward safe and eco-friendly driving while giving customers flexibility and potential savings on premiums.

Understanding consumer behaviour

EVs are not just vehicles—they’re data-generating devices. The onboard technology in EVs allows for real-time tracking and insight into consumer behavior. This helps insurers move from one-size-fits-all models to tailored coverage that reflects how the vehicle is actually used.

For example:

• City drivers with shorter commutes and slower speeds may present lower risk
• Owners with regular charging habits can benefit from better battery health and lower insurance costs

Learning from global models

• India isn’t alone in this journey. Countries like China and Brazil are ahead of the curve in creating specialized insurance products for EVs.
• In China, automakers and insurers collaborate to collect real-time data, allowing for highly accurate risk assessments.
• In Brazil, battery replacement and charging infrastructure are key parts of EV insurance policies.

These approaches have helped stabilize premiums and build trust in EV adoption—something India can learn from as the market matures.

Government support and policy push

The Indian government is playing a strong role in driving EV growth. Policies like the Battery Swapping Policy (2022 Union Budget) and incentives under FAME-II are making EVs more accessible.

This policy environment also creates opportunities for insurance innovation. With more EVs on the road and better support infrastructure, insurers can confidently expand their offerings and support the transition to clean mobility.

The road ahead

As India aims to become the world’s third-largest EV market, the role of the insurance sector becomes more critical. Clear, well-structured policies that reflect the unique needs of EVs—along with strong consumer awareness—will be essential.

The takeaway?

EVs are not only the future of transportation; they’re also reshaping how we insure vehicles. By embracing technology, creating tailored products, and educating consumers, the insurance industry can be a powerful partner in India’s green transition.

With thoughtful innovation and collaboration, insurance companies can play a leading role in powering India’s EV movement—one policy at a time.