No insurance claim for E20 fuel damage in older, non-compatible cars? ICICI Lombard says it can be treated as negligence | Mint

ICICI Lombard, one of India’s largest private-sector general insurance companies, has said that car insurance claims arising from E20 fuel-related damage in older, non-compatible cars sold before April 2023 may be rejected.

Such cases could be treated as improper use or negligence, the private insurer said in a blog post on June 9, 2026. E20 or petrol blended with 20% ethanol is the most widely available at fuel pumps in the country, owing to its mandatory use starting April 1, 2026.

“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,” ICICI Lombard wrote in the post.

The clarification comes amid growing concerns among vehicle owners about the impact of E20 fuel on older, non-compatible cars. Many are also unsure whether manufactures or insurers would cover any resulting damage, as insurance claims linked to fuel damage sit in a grey area that most policyholders only discover when they actually need to make one, the insurance company noted.

Older vehicles may not be compliant with E20

The Indian automobile industry started selling E20-compatible vehicles from April 2023, meaning a large number of cars and two-wheelers sold earlier were not designed to run on high-ethanol fuel blends.

As of 2026, the pan-India E20 rollout is largely complete, while high-octane options like XP95 are significantly more expensive, ICICI Lombard said in the post. As a result, many owners of older vehicles have little choice but to use E20 despite concerns about compatibility and potential damage.

“Most vehicles on Indian roads predate the 2023 compatibility threshold and were never designed for high-ethanol blends. Finding E10 or unblended petrol is increasingly difficult,” the blog post read.

According to the post, ethanol burns cleaner than petrol, but it behaves differently inside an engine. It carries less energy per litre, which can nudge your mileage down slightly. However, that is the minor part.

ICICI Lombard said the bigger concern is what E20 fuel impact on car components can look like over time. “Ethanol is corrosive. In vehicles not built for it, it can degrade rubber seals, damage fuel lines, and wear down engine parts gradually. The damage may not be immediate. It builds quietly, which makes it harder to catch and easier to dispute at claim time,” the insurer warned.

E20 use does not void insurance, but damage claims may still be denied

While the government had confirmed last year that using E20 fuel does not void insurance policy, ICICI Lombard added that is not the same as saying every damage claim linked to E20 will be approved.

“Standard policies usually exclude consequential damage, which is damage that builds up over time rather than happening in a single incident, like an accident,” the private insurer said.

Even though engine protection add-ons offer some coverage, but most are designed for water ingress or oil leakage, not chemical corrosion from fuel, the blog post said. Hence vehicle owners are advised to read the exclusions carefully before assuming they are covered.

“If your car is not E20-compatible and damage occurs, the manufacturer may reject the claim. It is best to check your manual or confirm with the dealer,” said ICICI Lombard. Another potential solution suggested by the insurer is using premium-grade fuel, which may help reduce the risk of E20-related issues in older, non-compatible vehicles.

“Premium fuels often have lower ethanol content, which is easier on older engines. It is not a full fix, but it helps,” it said.

Govt waives off excise duty on several ethanol-blended fuels

In its latest push for ethanol-blended fuels, the Narendra Modi-led Central government has waived off excise duty on several variants, including E22, E25, E27 and E30. This means that excise duty will be ‘nil’ on petrol with 22%, 25%, 27% and 30% ethanol blend.

The waiver is aimed at encouraging customers to move towards ethanol-blended petrol at a time when petrol and diesel prices have increased by a cumulative ₹7.5 per litre since the escalation of the West Asia conflict.