Chris Bennett, head of virtual loss adjusting at Crawford & Company (Crawford), will address the increasing risks posed by lithium-ion batteries at the 2024 AICLA/ANZIIF Claims Convention in Sydney today.
Bennett (pictured) will urge insurers to reevaluate policy conditions in light of the growing use of these batteries, which are found in an expanding range of household and commercial products.
“There are more and more items hitting the market that are powered by lithium-ion batteries as we move to a green future. That’s terrific on the one hand, but it also comes with emerging risk that our industry needs to understand and continue to learn more about,” he said.
Lithium-ion batteries, widely used in consumer electronics and power tools, are projected to be present in 33 devices in the average Australian household by 2026, according to the Australian Competition and Consumer Commission (ACCC).
Bennett noted that while these batteries are safe under normal conditions, user error often leads to fires. He explained that most incidents are not caused by manufacturing defects but by user behaviours like overcharging or mechanical damage.
“Causation, when it is linked to the batteries, is more often linked to user error, mechanical damage, and or charging behaviour, with very few claims in Australia involving manufacturing defects in the battery cells themselves,” he said.
He said the critical question for insurers is whether policies should cover claims where safety guidelines were not followed, such as overcharging devices.
Concerns over lithium-ion batteries have increased following recent incidents, including a fatal house fire in New South Wales (NSW). However, Bennett emphasised that these batteries often worsen existing fires rather than directly causing them.
Bennett claimed that the term “lithium-ion battery fire” can be misleading, as batteries may simply be present in a fire started by another source.
“The presence of lithium-ion batteries will make an existing fire worse. In other words, the fire is exacerbated by the presence of lithium-ion batteries, which become a secondary source of ignition,” he said.
He suggested that insurers could mitigate risks by setting policy conditions around safe battery storage and use, as well as encouraging consumers to purchase certified batteries from reputable manufacturers.
Bennett brought to light lithium-ion battery risks as electric vehicle (EV) insurance challenges emerge.
Earlier this year, Tom Hall, senior technical underwriter at Dawes Underwriting Australia (Dawes), highlighted the challenges facing insurers as the Australian EV market expands.
With limited data available on EVs compared to traditional vehicles, insurers are finding it difficult to accurately assess risks and set premiums, according to Hall.
Dawes, a long-time player in specialised motor vehicle insurance, was one of the first in Australia to offer insurance for EVs, beginning with Tesla vehicles in the early 2010s. The company has since updated its products to include specific coverage for EV risks, such as providing a $1,000 sub-limit for transport if a power outage prevents vehicle charging and up to $2,500 for repairing damaged charging stations.
Despite the benefits of EVs, Hall noted that battery-related fires remain a concern, with some insurers excluding coverage for thermal runaway fires. He advised EV owners to carefully review their policies to ensure they are fully covered.
The AICLA/ANZIIF Claims Convention, taking place today at the Sofitel Sydney Wentworth, will cover a wide range of emerging risks impacting the insurance industry.
This year’s theme, “Claims Under the Microscope – Driving Better Outcomes,” will feature discussions on topics such as lithium-ion battery safety, climate-related claims, and the growing role of artificial intelligence in claims processing.
Key speakers at the convention include Dr Daniel Mulino, chair of the Federal Parliamentary Standing Committee on Economics, and Emma Curtis, lead ombudsman for Insurance at the Australian Financial Complaints Authority.
The discussions will focus on new challenges facing insurers, from environmental claims to regulatory issues.
