Why the Fire Risk Sits on the OEM Sheet, Not the Rider or Fleet
An electric two-wheeler thermal-runaway event produces claims that flow in several directions, and a broker structuring cover for an e-scooter maker has to separate them cleanly. When an Ola Electric S1, an Ather 450 or an Ultraviolette F77 burns in a parking lot, the rider's own damage and any third-party bodily injury caused on the road fall under the motor policy the customer already holds. That is not the manufacturer's exposure to insure.
The exposure that lands on the original equipment manufacturer (OEM) balance sheet is different. It is the allegation that the vehicle was defectively designed or manufactured, that the battery pack or its cells failed, and that the resulting fire, injury or property loss was the maker's legal responsibility. Under the Consumer Protection Act 2019, a product manufacturer can be held liable even without proof of negligence where a manufacturing defect exists, and the definition of product liability action now covers the manufacturer, seller and service provider together.
This is why the E2W maker cannot rely on the retail motor ecosystem to absorb its risk. The relevant covers are third-party product-liability, public-liability, product recall, and warranty and finished-goods extensions, all written on the corporate policy of the manufacturing entity.
River, Simple Energy and the larger listed players face the same architecture of risk at different scales. The programme has to be sized to the installed base of vehicles on the road, not to annual production alone, because liability follows every unit sold for the full product lifecycle.
AIS-156 Amendment 4 and How It Reshapes the Liability Wording
The reference point every underwriter now applies is AIS-156, the automotive industry standard governing electric power trains and, critically, the battery-safety requirements for L-category vehicles that include two-wheelers. The fourth amendment to AIS-156, phased in from 2023 and in force since August 2024, tightened cell-level, module-level and pack-level safety testing after the cluster of E2W fires in 2022. It added stricter thermal-propagation, over-charge and short-circuit criteria and mandatory testing of the battery management system.
For an insurer, the standard functions as the negligence yardstick. If a maker cannot evidence conformity to the applicable AIS-156 amendment for the model in question, a product liability defence weakens sharply and the recall exposure rises. Brokers should expect the underwriting file to ask for ARAI or ICAT type-approval certificates, the battery supplier's test reports and the maker's own quality-control records before a liability limit is offered.
The policy-wording consequences are concrete. Many liability wordings carry an exclusion for loss arising from failure to comply with statutory safety standards. A maker who ships units that do not meet the current AIS-156 amendment could find a claim declined on that exclusion, not on the liability grant itself.
Amendment cycles also matter for legacy stock. A unit type-approved under an earlier amendment and still on the road carries a liability tail governed by the standard in force at the time of sale, so the maker's insurable-interest and disclosure must reflect a mixed fleet across amendment vintages, not a single compliance snapshot.
Costing a Mass Battery-Fire Recall Across a Model Line
A recall is where an E2W startup's insurance economics are decided. The cost of pulling back a model line is not the headline injury claim. It is the sum of many operational line items, and a recall extension has to name each one or the maker self-funds the gap.
A thermal-runaway recall on a two-wheeler platform typically triggers the following spend heads:
- Customer notification and communication across the installed base, often tens of thousands of units.
- Logistics to move vehicles or battery packs between customers, dealers and service centres.
- Replacement or retrofit cost of the battery pack, BMS firmware or the affected component.
- Additional labour, workshop capacity and temporary storage of hazardous packs.
- Third-party expert and forensic costs to establish root cause.
Product recall cover in the Indian market is usually written as a consequential-loss style extension over the product liability base, and it splits into first-party recall expense and third-party recall liability. A startup should model the worst realistic campaign: a single high-volume model, a battery-supplier defect, and a full-fleet recall. That figure, not an average annual loss, sets the recall sub-limit.
The distinction between a voluntary safety recall and a government-ordered one matters. Where MoRTH or the vehicle-safety framework mandates action, the recall is not discretionary, and the wording should respond to a regulator-directed campaign as clearly as to a voluntary one. Brokers should also confirm whether financial loss to the maker's own reputation and forced price rebates fall inside or outside the grant, because those heads are commonly excluded.
Structuring the Product and Public Liability Base for E-Scooter Makers
The liability spine of an E2W maker's programme is a third-party product-liability policy, ideally written on a broad-form basis and extended for the specific hazards of high-energy lithium packs. The grant should cover third-party bodily injury and third-party property damage arising from a defect in the vehicle, its battery or its software, including fires that spread from a parked scooter to a home, a basement or a neighbouring vehicle.
Several extensions are close to mandatory for this class. Product guarantee and failure-to-perform cover responds where the vehicle does not deliver promised range or performance and causes financial loss, a live issue given range-claim disputes in the E2W segment. Financial loss or pure economic loss extensions matter where no physical damage occurs but a defect causes recoverable loss. Where the maker exports, the wording must confirm the jurisdiction and governing-law clauses respond outside India.
Public liability and premises cover sit alongside for the factory, test track and battery-assembly lines. The indemnity limit should be set against the installed base and the plausible multi-claimant scenario, not against a single accident. A maker selling a hundred thousand units carries a very different aggregate tail from one selling five thousand.
Two structural choices repay attention. First, whether the policy is written on a claims-made or occurrence basis, since the long liability tail of a vehicle sold today argues for careful retroactive-date management. Second, the interaction with the directors-officers-liability tower, because a serious fire cluster attracts regulatory scrutiny and shareholder action against a funded startup's board. The product liability policy protects the company; the D&O tower protects the individuals who signed off the design and the safety claims.
Dealer, Warranty and Extended-Warranty Liability on the Manufacturer's Books
E2W startups sell through a mix of company-owned experience stores and franchised dealers, and the warranty promise is the manufacturer's, not the dealer's. That places two distinct liabilities on the OEM sheet that a broker must map separately from product liability.
The first is the standard battery and vehicle warranty. Most E2W makers offer a battery warranty measured in years or kilometres, and battery degradation or early cell failure creates a stream of warranty claims that is a balance-sheet provision rather than an insurable event in the ordinary sense. What is insurable is the catastrophic warranty spike caused by a common-mode defect, where a single battery-supplier fault forces mass replacement under warranty. Some makers structure this through warranty or machinery-breakdown style cover keyed to a defect trigger; others carry it as extended-warranty insurance underwritten separately.
The second is dealer and vicarious liability. A defect installed or serviced at a franchised workshop can expose the OEM through the subrogation chain, and the maker's liability programme should include vendors and dealers as additional insureds so that a claim against a dealer does not become an uninsured claim against the brand.
The certificate-of-insurance requirements flow downstream too. Dealers financing inventory and lenders taking security over unsold stock will demand evidence of cover, and misaligned additional-insured wording between the maker's and dealers' policies is a common source of disputed claims after a workshop fire.
Finished-Goods Business Interruption and Supplier Recall Contingency
The property and business-interruption side of an E2W maker's programme is shaped by two facts: large volumes of charged or partially charged lithium batteries sit in the plant and in finished-goods stores, and the supply chain is concentrated in a small number of cell and BMS vendors.
Finished-goods and warehouse fire exposure is severe because a rack of assembled scooters or a battery-storage room represents concentrated energy. The fire-policy and the material-damage section should be written to reinstatement-value, and the storage risk assessed against the plant's fire-detection, thermal-isolation and suppression standards. A business-interruption extension keyed to that material-damage base then protects gross profit while production is halted, which for a startup burning capital to scale is often the more threatening loss than the physical damage itself.
The less obvious exposure is supplier-driven. A defect in a bought-in cell or BMS can force the maker into a recall it did not cause, and the recovery route runs through the supplier. Contingent business interruption and supplier-recall extensions respond where a key vendor's defect or failure interrupts the maker's own operations or triggers a campaign.
Marine and transit-insurance cover for inbound cells and outbound vehicles closes the loop, with the lithium-battery packaging and dangerous-goods classification handled correctly so a transit claim is not defeated by a compliance exclusion.
Building an E2W OEM Programme That Actually Responds
An electric two-wheeler maker does not buy a single policy. It builds a stack: product and public liability at the base, a product-recall extension sized to a full model-line campaign, warranty and dealer-liability cover, finished-goods fire and business interruption, marine transit, and a D&O tower over the board. The engineering of that stack is in the wording, not the premium.
Three tests separate a programme that responds from one that disappoints at claim. Does the liability wording exclude regulatory breach so broadly that an AIS-156 amendment gap voids the cover? Does the recall extension name every real spend head and respond to a regulator-ordered campaign as well as a voluntary one? Do the additional-insured and cross-liability clauses knit the maker, its dealers and its lenders together so no claim falls between policies?
Answering those questions means reading and comparing the actual clauses that different Indian insurers use for product liability, recall and warranty cover, because the grants, exclusions and triggers differ materially between wordings that look similar on a schedule.
Sarvada gives brokers and risk managers a searchable library of insurer policy wordings, so the exact recall trigger, the regulatory-breach exclusion and the warranty-defect grant can be compared side by side before the E2W programme is placed. If you advise electric two-wheeler manufacturers or their founders, Request Access to see how the wordings behind these covers actually read, clause by clause.