The evolving risk landscape of electric vehicles

January 11, 2024

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With steadily increasing demand for electric vehicle (EV) — the International Energy Agency expects 14 million sales by year’s end of 2023, a 35% year-over-year increase — the speed at which the industry is required to deliver EV sales will increase as well. As mass-scaling lithium-ion batteries hit its peak, recall and warranty issues that come along with that speed-to-market turnaround will likely trend upward. Battery electric vehicle (BEV) recalls have risen 533% between 2018 and 2023. 

Auto manufacturers and industry professionals alike must prepare a plan to deal with inevitable future recalls. Whether it be scaling resources, or capacity to service the vehicles — the solutions will be nothing like those historically depended on for internal combustion engine (ICE) vehicles. 

EV recall landscape

According to the World Economic Forum, global sales of EVs surpassed 10 million for the first time in 2022, with EV sales leaping 55% year over year. As a result, 1 in every 7 cars purchased in 2022 was an EV, compared to 1 in 70 cars bought in 2017, just five years prior. 

EV sales are predicted to increase to about 73 million units by 2040, growing to 61% of total worldwide car sales, according to Goldman Sachs Research. In many developed countries, EV sales are anticipated to comprise more than 80% of all sales. Efforts to quickly scale battery technology can cause notable challenges: shortages of labor and materials, delays in construction of giga-factories to produce batteries at scale, and competition for resources within the supply chain, among others.

Early adopters of EVs may have been more forgiving regarding support, servicing and tech-related issues. Now, as EVs scale into the wider market, mainstream customers appear to look at it differently. A 2023 Deloitte global automotive consumer study found that affordability, range anxiety and battery safety are all significant purchasing decisions. But product quality is number one.

Product recalls have scaled alongside sales. According to data obtained from U.S. and European regulators, EVs have had 875 unique recall events over the past five years. 103 of those events, or 12%, are attributed to batteries. Other issue categories include fluid leaks, fire risks when charging, short circuiting and self-charging. 

Thermal runaway risks

When a recall occurs, the root cause and failure mechanism need to be identified to proceed to the next step: corrective action. Most serious among such events are those that end in fire — usually due to thermal runaway, a sudden energetic release of heat and energy from the battery in an uncontrolled manner until it catches on fire.

Most root causes are either mechanical (a crash scenario where the cell is crushed or deformed, for example), electrical (stemming from electrical abuse/overcharging), or thermal (when a battery pack isn’t cooled property or warmed up sufficiently). All three lead to an internal short circuit within the cell, which builds up heat and sets off uncontrolled reactions that cause fire, explosion and other hazards. 

Some failure modes will occur earlier in a vehicle’s lifetime, while others — a vehicle crash scenario, for example — will occur sporadically. As components within aging vehicles have an increased failure rate, a portion will occur due to wear-out. Cell design and various chemistries will influence thermal runaway’s likely root causes, too. 

EV range anxiety

Range anxiety is the widespread concern that an EV will not have enough battery charge to reach its destination, leaving its occupants stranded. This applies to an EVs lifespan, too — if the vehicle initially markets a 250,000-mile range, is that value dependable for a vehicle’s lifespan and warranty period? 

Range is one of many critical barriers — including affordability and battery safety concerns — to EV adoption, according to Deloitte’s 2023 global automotive consumer study. The study found product quality to be the premier factor driving consumer purchasing decisions — more so than brand familiarity/image, price, or even overall performance (including battery range). The impact recalls can have on consumer perception is a crucial consideration for automakers; it necessitates advance preparation and recall readiness, and a plan to mitigate reputational harm when a product-related incident does occur. 

Truth be told, it is difficult for auto original equipment manufacturers (OEMs) to accurately predict range, because EV batteries and the vehicle’s output power are highly variable depending on the current conditions and how the battery is operated. The outside temperature and overall climate, driving style, vehicle load and other conditions play a critical role. 

On the consumer side, fast charging is a known mechanism for degrading the battery cell more quickly. The power of day-to-day analytics on a vehicle-by-vehicle basis, and educating consumers on how batteries work, how they degrade, and how you can maximize long-term performance, is key to balancing range predictions and consumer expectations. 

Advanced failure prevention

After identifying the root cause and beginning on a course of corrective action, how do we prevent a failure from occurring again? Whether a redesign is necessary or consulting with the manufacturer, action must be taken to return a safe product to the streets.

Ensuring an EV’s initial design and build is as robust as possible does not solve every issue. But as EV adoption and usage increase globally, so too will the dataset OEMs have at their disposal to interrogate, analyze and use to make better informed decisions. The most promising failure prevention strategies lie in digesting the large sets of data provided by each vehicle. 

EVs contain complex wireless internal networks that are oftentimes connected back to the OEMs, enabling the proactive diagnosis of vehicle defects via telematics and the ability to fix issues remotely over the air. It also allows for continuous tracking of battery performance through high-quality data. Most settings can be adjusted remotely to tune the vehicle’s output. If a vehicle has a proven failure visible in its data, for example, an OEM might tweak certain settings to improve reliability. 

Some of these concepts were previously shared in a 45-minute webinar: Electrification and the evolving risk landscape.

Fire risk in the UK: Are lithium-ion batteries the new chip pan?

January 8, 2024

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Despite growing awareness and changes in technology, chip pans remain the most common cause of house fires in the UK, with around 12,000 cases every year, nearly 50 deaths and 4,600 injuries.

There is, however, a ‘new kid on the block’, set to rival the chip pan in the causation stakes. And the domestic insurance market isn’t the only one that needs to pay attention. Lithium-ion battery fires are on the rise for the commercial loss adjuster and given their widespread use in the modern world, have become a source of growing concern for both domestic and commercial underwriters.

Lithium-ion batteries aren’t just used in mobile telephones or electric vehicles (EVs), including e-bikes and e-scooters — they’re now prevalent in commercial vehicles, marine vessels, plant, machinery, battery, and banks and systems. These batteries are used in industries like manufacturing, construction, aerospace, telecommunications and leisure. Only now is society learning about the risks and hazards that come with these modern-day essential devices.

Risk examples 

The London Fire Brigade saw a 60% rise in e-bike fires in 2023. In fact, in the first six months of 2023, the fire and rescue service reported 70 e-bike, 14 e-scooter and 35 other lithium-ion battery fires. While concerns aren’t quite comparable to the chip pan risks yet, numbers are increasing and heading in a worrying direction. 

Sedgwick’s experts in the UK handled nearly 1,000 losses in 2023 where lithium-ion batteries have been at the heart of the cause, a 50% uplift from the year prior. The indemnity spend on these losses is now approaching £100m and this doesn’t take into account the lithium-ion battery marine cargo losses we’re handling in UK waters.

Identifying indemnity 

How do these lithium-ion battery claims become so costly? Given their rechargeable nature, many instances occur when the device is unattended, which presents a greater opportunity for fire spread and resulting damage. These types of fires also burn at around 400 degrees Celsius and are very difficult to extinguish. With all this in mind, underwriters clearly have a lot to consider.

The causes of fires involving lithium-ion batteries

The energy storage density in batteries has increased exponentially, from lead acid, through nickel cadmium to lithium-ion. Batteries have become compact, lightweight and convenient. The increased capacity in a small footprint, combined with lower power electronics, has resulted in their widespread proliferation. As a result, nearly every household and commercial property is packed full of portable sources of energy which could fail incendively. This is particularly so in the modern era of universal charging connectors and after-market components. Batteries of all types have to be used in specific ways and this isn’t always properly understood by the end user.

Batteries fail for many reasons, the most common reasons being overcharging, misuse or defects. For example: 

  • Over-charging using an incompatible charger
  • Mechanical or thermal damage through misuse
  • Manufacturing defect, such as an internal short

Incompatibility of chargers and battery packs

At the cheaper end of the market, these devices are often inadequately matched with chargers, poorly manufactured and lack appropriate battery management systems which protect batteries from entering dangerous states. In addition, there are a number of lithium-ion battery chemistries, and the charging regime must match the chemistry. In situations where the correct charger has been used, fires have continued to occur because of the location of the device when being charged. For instance, mobile phones shouldn’t be charged on soft furnishings or tucked under a child’s pillow. 

The dangers during charging and operation can be mitigated by the inclusion of battery management systems in devices and battery packs. Battery management systems can identify batteries which are problematic and either isolate the cell or shut down the battery pack before an incendive event. Battery management systems and other protective functions are often omitted from batteries and appliances at the cheaper end of the market.

Next steps for manufacturers 

Major manufacturers of lithium-ion batteries are keenly aware of the fire risks and chemistries are being introduced where batteries reaching thermal runaway* release their energy more slowly and with an associated reduced peak energy. However, the energy density for these chemistries is lower and they are therefore less desirable for devices such as mobile phones where maximum energy density is required. The race for maximum density pushes battery tolerances to their limits and has resulted in high-profile handset recalls.

Chip pan fires were likely not a strong primary source of recoveries, but battery fires are something to become aware of. Our legal services division has seen a rise in the both the frequency and value of claims that relate to battery fires. These incidents tend to be fires that occur during the charging phase, which often happens at night and in a low traffic area leading to advanced stages of conflagration before the fire can be tackled.

Battery fires are always reviewed by Sedgwick for recovery prospects against the manufacturer, importer and seller. Niche avenues against repairers and credit providers can also be pursued. Due to the need for forensic advice, detailed evidence regarding ownership and use, and strong resistance from commercial sellers who investigate any suggestion of wider issues with batches of batteries, this area can be complex. Supply chains into the UK can be hard to ascertain with the importer often being culpable for products manufactured in other jurisdictions.

Obtaining forensic evidence early on can be the key to a recovery after fire damage. Modern payment methods are often online, so proof of purchase is usually easy to establish, but sellers are often difficult to contact and have limited funds if not insured. An active adjuster linked to quick forensic advice is key in this area.

More widely, underwriters will want to think about policy response and drafting with the heightened risk of substantial damage when multiple large batteries are placed near each other — or in locations when fires cannot be easily fought or contained. The domino effect of small fires into much larger and uncontainable ones is another example of the increasingly connected world we live in.

*One of the primary risks related to lithium-ion batteries. It is a phenomenon in which the lithium-ion cell enters an uncontrollable, self-heating state. 

Learn more > Contact Scott Cameron, major and complex loss operations director, Sedgwick UK at [email protected].

Is it feasible to expect new EV sales in the US to reach 50% by 2030?

March 18, 2022

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By Wayne Mitchell, global director, sales and marketing

It may seem like everyone you know is driving an electric vehicle (EV) or is planning to buy one in the near future.

On the contrary, adoption of EVs in the United States is very low – lower than in other major markets like China and Europe. Despite increasing 83%, EVs accounted for just 3% of new car sales in the U.S. in 2021. By comparison, this figure stood at 9% in China, and 14% in Europe. While it may not seem like a big deal that EV sales make up such a small portion of the market, consider the bigger picture.

The bigger picture

As part of its climate initiatives, the Biden Administration is in the midst of a major push to encourage the take-up of EVs. The White House has announced an ambitious goal for EVs to account for 50% of all new car sales by 2030 – that’s a 43% increase as a share of the total market in under a decade. The administration’s first step towards achieving that goal is to establish a national EV charging infrastructure to make it easier for EV drivers to get around. At a projected cost of $5 billion, the national infrastructure will include 500,000 charging stations across the country, which will be built over the next five years.

However, this initiative alone is unlikely to help propel uptake of EVs to achieve the administration’s goal. Even a proposed $7,500 tax credit for the purchase of an EV might prove insufficient. Increasing EV sales by such a significant amount in such a short period of time will undoubtedly have significant implications for automakers, supply chains and product/motorist safety. While traditional automakers have recently increased their EV offerings, we’ve also seen many face recalls of these products due to safety concerns.

A potentially bumpy road ahead

It’s important to note that much of the technology used in today’s EVs is still in its infancy. Recent recalls attributed to EV lithium-ion batteries underscore the challenges facing automakers and battery suppliers in making a stable and reliable product to power these vehicles. Recent news reports about lithium-ion battery fires have done little to encourage would-be buyers to take the next step. Recalls that result from fire risks can also prove financially and reputationally costly for automakers. In one recent event, a major global automaker and its battery provider saw their share values tumble 3.9% and 2.8% respectively as a result of a battery cell related incident.

In order to achieve the administration’s target of 50% new car sales, EV manufacturers will also need to scale up their production so that there are sufficient vehicles to satisfy consumer demand. Ongoing supply chain disruptions will make this difficult, as manufacturers struggle to secure parts, including key semiconductor chips. However, should this demand fail to materialize as expected, and supply outstrips market demand, automakers will face financial burdens that will need to recouped elsewhere, potentially passed on to consumers.

Finally, in this drive to 2030, and the industry’s longer-term migration from combustion to electrification, a great deal of technological innovation will be necessary. While innovation has many benefits, it also takes time and trial and error. Under pressure to achieve rapid (and successive) gains, automakers and component suppliers will need to ensure that stringent testing and quality standards are upheld at every stage.

Trusted by the world’s leading brands, Sedgwick has managed more than 5,000 of the most time-critical and sensitive product recalls in 60+ countries and 20+ languages, over 25 years. To find out more about our experience within the automotive sector, visit our website.

Electric vehicle claims

November 30, 2021

Electric vehicle charging
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By Chris Frechette, vice president, liability practice

Advances in battery technologies and environmental concerns continue to bolster a growing interest in the adoption of electric vehicles (EVs).

While the U.S. lags Europe in adoption, multiple indicators suggest a shift away from many hybrids to more full electrics. There is also an acceleration in projected sales trending toward mass adoption in the U.S. well within the current decade. With the proliferation of EVs come new challenges for insurers. Traditional models for underwriting internal combustion engine (ICE) vehicles do not translate. Values, depreciation rates, repair costs and both first and third-party exposures present new and unique distinctions. Consequently, the processes, resources, and expertise requisite to administering claims with EVs must be re-examined and enhanced to provide appropriate expert adjudication and mitigation.

Click here to view or download the full article.