Will your insurance pay for E20 fuel damage?

ICICI Lombard has flagged that E20-linked damage claims in older vehicles may not be straightforward. The issue has sharpened concerns over whether fuel-related wear, negligence or policy exclusions could leave owners paying repair costs.

In Short

• E20 fuel use in older vehicles raises insurance claim concerns
• ICICI Lombard says E20 use may be seen as negligence
• Standard policies exclude damage developing over time

A car or two-wheeler is among the biggest purchases for numerous Indians, often bought after years of saving and protected through insurance premiums paid every year.

But as India moves towards higher ethanol-blended petrol, a new concern is beginning to emerge among owners of older vehicles: what happens if E20 fuel damages the vehicle, and will the insurance company pay for it?

The question has gained attention after an FAQ published by ICICI Lombard highlighted that insurance coverage for E20-related damage may not always be straightforward, especially in older vehicles that were not designed to run on the fuel.

WILL ETHANOL BLENDED FUEL RELATED DAMAGE BE COVERED BY CAR INSURANCE?

The insurer clarified that using E20 fuel does not automatically make a car insurance policy invalid. However, it added that this should not be interpreted to mean that every damage claim linked to E20 will be approved.

"Using a fuel your vehicle was not made for can be treated as improper use or negligence. Insurers may review these claims from that angle, and rejection is possible," the ICICI Lombard FAQ said.

The FAQ further explained that standard motor insurance policies usually exclude consequential damage, which refers to damage that develops over time rather than occurring because of a single incident such as an accident.

It also noted that while engine protection add-ons may offer some additional protection, most are designed to cover issues such as water ingress or oil leakage and may not necessarily cover chemical corrosion caused by fuel.

E20 CONCERNS ARE ALREADY GROWING AMONG VEHICLE OWNERS

The insurance question comes at a time when E20 fuel has already become a point of concern for many owners of older petrol vehicles.

India has rolled out E20 petrol as part of its plan to reduce dependence on imported crude oil and increase the use of domestically produced ethanol. However, millions of vehicles manufactured before E20-compatible engines became common continue to run on the fuel because there is little choice available at petrol pumps.

A LocalCircles survey of owners of petrol vehicles manufactured before 2023 found widespread concerns over reduced mileage, higher maintenance costs and vehicle performance after the shift to E20.

The survey found that one in two owners of older petrol vehicles wanted the option to go back to E0 or E10 petrol. Many respondents also reported lower fuel efficiency, increased repair costs and problems related to engine performance and vehicle components.

For many middle-class families, replacing a vehicle is not a practical solution. A car or bike represents a major financial commitment, and most owners expect to use it for several years.

WHY INSURANCE HAS BECOME THE BIGGEST QUESTION

Lower mileage or higher fuel expenses are costs that consumers can calculate. A repair bill can also be managed, although it adds to the burden.

But uncertainty over insurance coverage raises a bigger question because insurance is meant to protect vehicle owners from unexpected financial losses. If a claim involving E20-related damage is assessed as improper use, negligence or consequential damage, some consumers fear they could be left to bear expensive repair costs themselves despite having an active policy.

Experts say the outcome of any claim would depend on the specific circumstances of the damage, the vehicle's compatibility with E20 fuel, the terms and exclusions of the insurance policy and the insurer's assessment.

India's ethanol blending programme has helped reduce crude oil dependence and support domestic ethanol production, but the transition has also raised practical questions for millions of owners of older vehicles.

The debate around E20 has moved from concerns over mileage and maintenance to a more complicated issue: whether a vehicle owner's insurance protection could be tested because of a fuel transition over which many consumers have little control.

For now, E20 fuel does not void a vehicle's insurance policy. However, the fine print of insurance contracts and the nature of the damage may determine whether every claim gets approved.

(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)

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