The severity of electric vehicle (EV) battery fires is increasing within the automotive industry, with insurers and businesses facing costly claims. Allianz UK is urging automotive businesses to recognize the risks associated with lithium-ion batteries and take proactive steps to mitigate them.
According to Allianz, lithium-ion batteries, the power source for EVs, pose unique fire hazards due to their thermal instability. When damaged, improperly stored, or transported incorrectly, these batteries can experience a phenomenon known as ‘thermal runaway’—a rapid self-heating reaction that can lead to explosions. Worryingly, thermal runaway can occur days or even weeks after the initial damage, making early detection and proper handling critical.
Although research, including studies from Thatcham Research, suggests that EVs are less likely to catch fire compared to traditional gasoline-powered vehicles, when fires do occur, they tend to be far more intense and difficult to control. The ferocity of lithium-ion battery fires presents significant challenges for motor traders, especially regarding safety and property damage.
Several high-profile incidents within the automotive sector have highlighted the dangers associated with EV battery fires. Furthermore, some EV batteries have been found to contain manufacturing defects, increasing the likelihood of combustion.
Olivia Baker, head of motor trade at Allianz UK, emphasized the financial and operational risks, stating, “The severity and financial impact of lithium-ion battery fires are considerable. Due to the chemical reactions and toxic materials left behind, these fires can render buildings beyond economical repair. Understanding the risks and implementing effective prevention and management strategies are crucial to safeguarding businesses and ensuring the safety of employees, though thankfully, the total number of claims remains relatively low.”
Two recent automotive facility fires resulted in insurance claims exceeding £5 million ($6.3 million) and £1.5 million ($1.9 million), respectively. Both incidents stemmed from faulty EV batteries that had been removed and stored at the garages while awaiting collection for manufacturer inspection.
It’s not just EV batteries that pose risks—many power tools commonly used in automotive workshops also contain lithium-ion batteries. For example, a fire at a tire fitting center led to a £250,000 ($315,000) insurance claim after a power tool ignited while charging.
Automotive businesses regularly handle EVs, but the risks increase when vehicles exhibit battery defects, are subject to recalls, or have advisory notices linked to battery performance. Businesses with high vehicle turnover, such as dealerships and repair shops, face particularly significant exposure. Franchised dealers are at additional risk when EVs are brought in for diagnostics or warranty work, and breakdown recovery operators must quickly assess potential battery issues before transport.
Risk Mitigation Strategies
To help automotive businesses reduce the risks associated with EV battery fires, Allianz UK recommends:
- Implementing rigorous inspection protocols for damaged batteries
- Ensuring proper storage and charging practices
- Collaborating with insurers and brokers to develop risk prevention strategies
Allianz UK provides risk management guidance to brokers and policyholders, aiming to improve awareness and education surrounding lithium-ion battery risks. By proactively managing these hazards, businesses can enhance workplace safety and minimize potential financial losses.
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