Increasing Electric Vehicle and Battery Fires... "Insurance Companies Must Actively Engage in Risk Management"

Boheom Yeon 'Battery Fire Risk and the Role of Insurance' Seminar Held

As the electric vehicle and energy storage system (ESS) industries grow, there have been suggestions that insurance companies should actively manage the fire risks related to batteries. The argument is that insurers should not only focus on post-incident compensation but also pay attention to prevention.

On the 26th, Ji-yeon Cheon, a research fellow at the Korea Insurance Research Institute, stated at the seminar "Battery Fire Risks and the Role of Insurance" held at the Insurance Research Institute in Yeouido, Seoul, "While the role of insurance companies is to compensate for damages when they occur, this also provides an incentive to prevent the occurrence of damage itself," adding, "Insurance companies could consider offering discounts to customers who receive professional fire prevention inspection services."

Recently, risks related to electric vehicle fires, such as the electric vehicle fire in Cheongna, Incheon, have been increasing. The cumulative number of electric vehicles registered domestically surged from 30,000 in 2017 to 640,000 as of August this year. During the same period, the share of electric vehicles in total registrations rose from 0.11% to 2.43%. It is projected that this share will increase to about 15% by 2030. As electric vehicle usage grows, the frequency of electric vehicle fires is also rising. Electric vehicle fires numbered 24 in 2021, 43 in 2022, and 72 in 2023, showing a gradual increase. During this period, 25.9% of fires occurred while parked, and 18.7% occurred during charging. This indicates that a significant portion of fires happened in situations where immediate response was difficult.

Incheon Cheongna apartment fire accident site. [Image source=Yonhap News]

In light of the growing unexpected risks related to electric vehicle fires, there is a call for insurance companies to manage risks by insurance product type, focusing on prevention and minimizing coverage gaps. Research fellow Cheon said, "In the case of automobile insurance, it is necessary to analyze the differential causes of accidents by vehicle fuel type and consider ways to reasonably reflect this in insurance premiums," adding, "Standards for evaluating battery repair and replacement and safety testing methods should be established, and safety standards should be prepared in anticipation of the expansion of used electric vehicles." He continued, "For fire insurance, the role of accident prevention should be strengthened by linking group fire insurance with fire prevention inspection services," and added, "Insurance products that can prepare for various risks, such as combining automobile insurance and residential fire insurance, should be developed."

Myung-young Choi, head of the Research and Development (R&D) Strategy Team at the Korea Fire Insurance Association, viewed the introduction of a reward and penalty system using insurance as effective for strengthening risk management of lithium-ion batteries. Team leader Choi said, "The manufacturing and application fields of lithium-ion batteries are evolving technologies, and there is a lack of reference materials, making it practically difficult for regulations to keep pace with technological development," adding, "Risk management should be encouraged by providing insurance incentives to workplaces with excellent risk management that meet advanced standards." He further explained, "Excessive underwriting competition among insurers raises concerns about the ability to properly price risks and the deterioration of risk management," emphasizing, "Proper risk assessment is necessary for appropriate risk underwriting."

There was also a point made that the causes of ignition and the causes of fire spread in electric vehicle fires should be approached separately. Research fellow Cheon said, "Last October, a diesel vehicle fire at London Luton Airport damaged about 1,200 vehicles and caused the collapse of a building worth 33 billion won, but there was no movement to ban diesel vehicles," adding, "In Korea, there is a tendency to say electric vehicles are dangerous and to avoid them, but if ignition causes and fire spread causes are not properly distinguished and vague fears are held, it will be difficult to find proper solutions." He added, "Among global electric vehicle fires, 48% are of unknown cause, making it difficult to determine the liable party, so social and individual response measures should be prepared in case of compensation gaps."

This content was produced with the assistance of AI translation services.