24 Jul Strata Insurance Insights: Why Insurers Are Keeping An Eye On Lithium-Ion Batteries

In recent years, Australia has experienced a surge in fires linked to lithium-ion batteries, with devastating consequences for residents and their property. Residents of strata buildings are particularly vulnerable to these fires due to the high density of occupants and shared spaces.

The once innocuous lithium-ion battery has evolved into a significant fire hazard, posing a growing threat to strata buildings across Australia. These are typically small rechargeable batteries with a high energy density (can store a higher amount of energy in respect to its mass), offering better power efficiency than other battery types. However, if a battery fails, it can burst the cells which can result in an intense, self-sustaining fire that can be difficult to extinguish.

The scale of the problem is alarming. Fire and Rescue NSW (FRNSW) found that Lithium-Ion battery fires have risen from 165 in 2022 and 272 in 2023, to 131 as of 7 June 2024. 35 of those fires in 2024 were related to micromobility devices such as e-bikes, e-scooters and e-skateboards.[1]

It’s clear that the threat posed by lithium-ion batteries is real and urgent. To protect your strata building and its residents, understanding the risks and taking proactive measures is essential.

Understanding the risks

Lithium-ion batteries, while convenient, harbor a dangerous potential. These batteries contain a delicate balance of chemicals that store and release energy. When this balance is disrupted, the consequences can be catastrophic. The common causes of battery failure include:

• Severely damaged or faulty lithium-ion batteries
• Overcharging or incompatible chargers
• Poor design, quality and manufacturing
• Poor battery management
• The battery is submerged in water
• Unsafe waste disposal due to punctures, compacting, or dropping.

Extinguishing a lithium-ion battery fire is particularly challenging due to the intense heat they can generate. These self-sustaining fires can lead to significant building and content damage.

Preventative Measures

While the risks associated with lithium-ion batteries are substantial, proactive measures can significantly reduce the likelihood of a fire. To promote safety, Fire and Rescue NSW (FRNSW) is reinforcing its public messages about handling lithium-ion batteries and related devices with extra caution. It warns people:

• Never sleep or leave home with your Lithium-battery-powered devices charging
• Don’t leave them constantly on charge
• If Lithium batteries are damaged or compromised, dispose of them properly
• Don’t throw them out in the rubbish, they can start garbage truck or rubbish tip fires when compacted
• Contact your local, approved recycling centre for disposal advice
• Don’t leave devices charging on beds, sofas or around highly flammable materials
• Try to charge devices outside if possible
• Always buy reputable Lithium-battery brands and never ‘mix and match’ components
• Beware of cheap, substandard Lithium battery-powered devices
• Avoid dropping, crushing or piercing battery cells
• Store batteries and devices in a cool, dry area, away from combustible materials
• Install active smoke alarms in your home/garage
• Ensure you have a home evacuation plan in the event of fire

By following these guidelines and fostering a culture of awareness, strata residents can significantly mitigate the risk of fire and create a safer living environment for all. FRNSW has created the following documents, which could prove valuable for strata managers and residents.

• General battery and charging safety factsheet (PDF)
• E-bike and e-scooter charging safety poster (PDF)

More information can be found on the FRNSW website: www.fire.nsw.gov.au/batteries 

The role of insurance

Comprehensive strata insurance is essential for protecting your strata building and its residents from the financial consequences of a lithium-ion battery fire.

At the time of writing no explicit risk profile as been universally established to determine appropriate premiums for lithium-ion battery related incidents.

In a specific case (not strata-related but still relevant as property insurance), where we approached the market for a boarding house insurance policy, one insurer advised they would decline to quote if e-scooters were inside the premises. This highlights the evolving nature of this issue, where insurers’ claims experience will influence future underwriting questions and policy changes, such as exclusions or premium adjustments.

Lithium-ion batteries, while offering unparalleled convenience, pose a significant fire risk to strata property and their residents. By understanding the factors contributing to battery fires and implementing preventive measures, strata residents can significantly reduce the likelihood of a disaster and create a safer environment for all.

[1] https://www.fire.nsw.gov.au/incident.php?record=reclptayWrpLV6F61

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