From laptops, to electric vehicles and industrial machinery, lithium-ion batteries are one of most efficient and reliable rechargeable batteries out there. However, with the increasing number of incidents involving batteries catching fire (and causing costly damage), the insurance industry is growing increasingly cautious of the risks associated with this energy source.
Businesses have a responsibility to ensure robust risk management practices are put in place to mitigate potential fire hazards; from making sure lithium batteries are being stored correctly, to carrying out regular inspections for damage and defects. In this article we’ll explain the risks associated with lithium batteries, and the risk management steps you can take to ease the concerns of your insurer.
What are the risks associated with lithium-ion batteries?
- Thermal Runaway: Most fires burn themselves out, but a fire caused by thermal runaway just keeps getting hotter and hotter as the energy it releases drives up the temperature. Whether caused by BMS failure, damage, overcharging or changes in temperature, thermal runaway is a dangerous phenomenon where a lithium-ion battery experiences a self-sustaining increase in temperature due to a chain reaction. This can result in the battery venting and releasing toxic flammable gases, exploding or catching fire.
- Physical Damage: If a lithium battery is physically damaged (hit, dropped, or punctured) their internal structure can be damaged, leading to short-circuits which can also cause a fire to occur.
- Electrical short-circuits: Often caused by production defects, design errors, or damage – a short-circuit within a battery can quickly create an uncontrolled release of energy which can produce a lot of heat and potentially ignite the battery.
- Improper storage: Storing lithium-ion batteries in hot or poorly ventilated areas can increase the risk of fires, potentially leading to thermal runaway.
Adherence with Material Safety Data Sheets (MSDSs) are essential, and it’s important to note you can have different safety guidelines from different manufacturers for a near identical types of battery.
Why are they such a concern to the insurance industry?
- Increase in fire damage claims: This is particularly problematic in manufacturing plants and large scale storage facilities where costly property damage and large losses may occur. Fires caused by lithium-ion batteries can result in large claims due to extensive property damage, business interruption, personal injury and liability costs, and the high frequency and severity of these incidents make it difficult for insurers to price policies appropriately.
- Regulatory and compliance challenges: Insurers must navigate a complex landscape of regulations governing the safe handling, storage, and transportation of lithium-ion batteries. Non-compliance by insured parties can lead to increased risk exposure, regulatory fines, and complex claims scenarios.
- Technological uncertainty: New battery designs and materials often come with unknown risks, and the rapid pace of this evolving technology makes it challenging for insurers to assess and underwrite policies effectively.
- Market volatility: The lithium-ion battery market is highly dynamic, with fluctuating supply chains and varying standards among manufactures, leading to complicated risk assessments.
“UK fire services attended 46% more fires linked to lithium-ion batteries in 2023 than 2022″ according to new research from business insurer QBE.
What steps can I take to reduce my risk? (and ease the concerns of my insurer)
- Correct storage and charging procedures: Lithium-ion batteries should be stored in cool and dry places to prevent them from getting damaged, and to reduce the risk of overheating (making sure to keep them away from direct sunlight and extreme temperatures). To keep batteries safe, adhere to the Material Safety Data Sheet(s), use the correct chargers and follow the recommended guidelines for voltage and current. It’s also good practice to store loose batteries in protective cases to stop them touching things that conduct electricity, which could lead to sparks.
- Trusted sources: An often-overlooked factor is where the batteries have originated from. They should be sourced from reputable manufacturers and suppliers only, as trusted sources are more likely to meet strict safety and quality standards, which reduces the risk of defects that can cause fires. Suppliers should meet international safety standards such as the ISO (International Organisation for Standardisation), and batteries should be fully tested and quality checked.
- Risk Management tools: Thermal imaging cameras can be used to check how hot batteries are when in storage or when charging by spotting any overly heated areas before they become an issue. BMS (Battery Management Systems) can also monitor and control battery health, including charge and temperature.
- Fire Risk Assessment: Regularly check stored batteries for signs of damage, such as swelling, leaks, or changes in shape. If a battery is damaged, dispose of it right away to avoid the risk of fire. It’s also vital to ensure fire suppression and handling equipment is available near where you store batteries, and staff should be trained on what to do in case of an emergency.
There’s no doubt that lithium-ion batteries offer tremendous benefits to the modern world, but with their mass production comes a significant increase in fire risks that make insurers cautious.
By understanding these risks and implementing comprehensive risk management strategies, businesses can demonstrate positive risk attitude, improve their safety profiles and potentially ease the concerns of insurers, paving the way for more accessible and sustainable insurance solutions.
Need advice on how to reduce your risk? Speak to our experts today.
Call us on 01628 532 613
Need advice on how to reduce your risk? Speak to our experts today.
Call us on 01628 532 613