New Car Replacement Insurance Market Report 2025

The new car replacement insurance market size has grown strongly in recent years. It will grow from $3.78 billion in 2024 to $4.14 billion in 2025 at a compound annual growth rate (CAGR) of 9.4%. The growth observed during the historical period can be credited to the rise in vehicle ownership and car sales, escalating repair and replacement expenses, increased consumer awareness regarding comprehensive coverage, a growing preference for full-value reimbursement, and the expanding adoption of auto insurance add-on products.

The new car replacement insurance market size is expected to see strong growth in the next few years. It will grow to $5.85 billion in 2029 at a compound annual growth rate (CAGR) of 9%. The growth in the forecast period is expected to be driven by rising demand for personalized insurance products, greater integration of telematics in auto insurance, increased adoption of electric vehicles, expansion of online insurance policy distribution, and a heightened focus on customer-centric insurance solutions. Key trends anticipated during the forecast period include advancements in digital claim processing, innovations in usage-based insurance models, incorporation of AI and machine learning in underwriting, adoption of blockchain for policy management, and the emergence of mobile-first insurance platforms.

The increasing number of accidents is expected to drive the growth of the new car replacement insurance market in the future. Accidents are unforeseen events or incidents that cause damage, injury, or harm, often resulting from human error, mechanical failure, or environmental factors. The rise in accidents is attributed to distracted driving, which reduces attention on the road and increases the likelihood of collisions. New car replacement insurance helps mitigate the financial consequences of accidents by providing policyholders with a full replacement vehicle, promoting safer driving habits and faster recovery after collisions. For example, in May 2023, the Australian Government, an Australia-based agency, reported that road crash deaths in 2022 increased by 5.8% to 1,194. Consequently, the growing number of accidents is fueling the expansion of the new car replacement insurance market.

Leading companies in the new car replacement insurance market are launching innovative coverage options, such as endorsement-based flexibility, to provide customizable insurance solutions that address individual customer needs, enhance policy value, and boost retention by allowing policyholders to adjust protection levels without purchasing entirely new policies. Endorsement-based flexibility refers to the ability to personalize an insurance policy by adding optional coverages or benefits through endorsements for an additional fee. For instance, in March 2022, Acuity Insurance, a US-based insurer, introduced a new optional endorsement called Replacement Benefits Coverage. This endorsement improves standard auto policies by providing New Car Replacement Cost Coverage. If a vehicle is declared a total loss due to an accident, the coverage pays for a brand-new vehicle of the same make and model. This offers policyholders protection beyond the usual actual cash value payout, aiming to provide greater financial security and peace of mind for drivers with newer vehicles.

In January 2024, Aviva plc, a UK-based insurance company, acquired Optiom O2 Holdings Inc. for an undisclosed sum. Through this acquisition, Aviva intends to enhance its presence in Canada’s specialty insurance sector, particularly in vehicle replacement coverage. Optiom O2 Holdings Inc. is a Canada-based provider of new car replacement insurance.

Major players in the new car replacement insurance market are AXA S.A., Allianz SE, Nationwide Mutual Insurance Company, American International Group Inc., The Allstate Corporation, Liberty Mutual Insurance Company, The Travelers Companies Inc., Aviva Plc, American Family Mutual Insurance Company S.I., MAPFRE S.A., The Hartford Financial Services Group Inc., Ameriprise Financial Inc., Assurant Inc., Erie Insurance Group, Plymouth Rock Assurance Corporation, The General Automobile Insurance Services Inc., Acuity Insurance, New Jersey Manufacturers Insurance Group, Bajaj Allianz General Insurance Company Limited, and Wallace & Turner Inc.

North America was the largest region in the new car replacement insurance market in 2024. Asia-Pacific is expected to be the fastest-growing region in the forecast period. The regions covered in new car replacement insurance report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East and Africa. The countries covered in the new car replacement insurance market report are Australia, Brazil, China, France, Germany, India, Indonesia, Japan, Russia, South Korea, UK, USA, Canada, Italy, Spain.

Note that the outlook for this market is being affected by rapid changes in trade relations and tariffs globally. The report will be updated prior to delivery to reflect the latest status, including revised forecasts and quantified impact analysis. The report’s recommendations and conclusions sections will be updated to give strategies for entities dealing with the fast-moving international environment.

The rapid escalation of U.S. tariffs and the resulting trade tensions in spring 2025 are significantly impacting the financial sector, particularly in investment strategies and risk management. Heightened tariffs have fueled market volatility, prompting cautious behavior among institutional investors and increasing demand for hedging instruments. Banks and asset managers are facing higher costs associated with cross-border transactions, as tariffs disrupt global supply chains and dampen corporate earnings, key drivers of equity market performance. Insurance companies, meanwhile, are grappling with increased claims risks tied to supply chain disruptions and trade-related business losses. Additionally, reduced consumer spending and weakened export demand are constraining credit growth and investment appetite. The sector must now prioritize diversification, digital transformation, and robust scenario planning to navigate the heightened economic uncertainty and protect profitability.

New car replacement insurance is a type of auto insurance coverage that provides a brand-new vehicle of the same make and model if the recently purchased car is totaled, instead of paying only the depreciated value. This coverage usually applies to cars that are less than one or two years old and may include mileage limits. It helps protect against the rapid depreciation of a new vehicle’s value.

The primary coverage types under new car replacement insurance include comprehensive, collision, and liability. Comprehensive coverage protects against damages not caused by collisions, such as theft, fire, vandalism, weather-related incidents, and animal impacts. The vehicle categories covered include passenger vehicles, commercial vehicles, and electric and hybrid vehicles. Customer demographics consist of age groups, income levels, and occupations. Distribution channels include insurance brokers, direct response, banks, and online platforms, serving various end users such as individuals and commercial entities.

The new car replacement insurance market research report is one of a series of new reports that provides new car replacement insurance market statistics, including the new car replacement insurance industry global market size, regional shares, competitors with the new car replacement insurance market share, detailed new car replacement insurance market segments, market trends, and opportunities, and any further data you may need to thrive in the new car replacement insurance industry. This new car replacement insurance market research report delivers a complete perspective of everything you need, with an in-depth analysis of the current and future scenarios of the industry.

The new car replacement insurance market includes revenues earned by entities through loyalty-based replacement programs, mileage-based replacement plans, and lease-specific replacement coverage. The market value includes the value of related goods sold by the service provider or included within the service offering. Only goods and services traded between entities or sold to end consumers are included.

The market value is defined as the revenues that enterprises gain from the sale of goods and/or services within the specified market and geography through sales, grants, or donations in terms of the currency (in USD unless otherwise specified).

The revenues for a specified geography are consumption values that are revenues generated by organizations in the specified geography within the market, irrespective of where they are produced. It does not include revenues from resales along the supply chain, either further along the supply chain or as part of other products.

This product will be delivered within 1-3 business days.