Have seen this several times and replacing the wires usually fixes the problem. I know if you strip the insulation off of the wires 4-5 inches you usually find a lot of corrosion which leads to a lot of problems and I don't know exactly how but it creates a situation very similar to a short in the wire which leads to hot wire and yes it will cause a fire if you are unlucky.

When I rewire I dip the top of the connector in plasti-dip

http://www.google.com/shopping/produ...42939376378815

which is a rubberized coating for tool handles. Have not seen corrosion in the wiring since I started is ~25 years ago. Marine wiring by its very nature is a contradiction. I look at used boats all the time and am amazed at some of the things I see but the most common is corroded rusty terminal strips, wires that are haphazzardly run, splices that are loosely sealed with electrical tape. All of which are signs to me of impending failure.

Heat shrink tubing, plastic-dip and a spray can of battery terminal protector and prevent a lot of problems