IIQE Paper 1 Principles and Practice of Insurance Examination Quiz 01 Advanced

The principle of utmost good faith requires both parties to an insurance contract to act honestly and disclose all material facts. A material fact is any information that would influence a prudent insurer’s decision to accept the risk or determine the premium.

* **Option I:** The duty of utmost good faith revives at each policy renewal, requiring the insured to disclose any new material facts that have arisen since the original policy inception or last renewal. This statement is correct.
* **Option II:** If an insured requests alterations to their policy during its term, the duty of utmost good faith applies specifically to those changes. They must disclose any material facts relevant to the requested alteration. This statement is correct.
* **Option III:** The duty to disclose material facts generally ceases once the insurance contract is concluded. Facts that come to the proposer’s knowledge after the contract is in place typically do not need to be disclosed unless the policy terms specify otherwise. This statement is correct.

Therefore, all three statements are correct.

The Insurance Authority (IA) assesses the fitness and properness of insurance intermediaries based on several criteria, including reputation, character, financial status, and solvency. When evaluating a business entity, the IA considers various factors that could indicate a lack of financial stability or integrity.

Receivership, administration, or liquidation proceedings against a business entity raise concerns about its financial solvency and ability to meet its obligations. Similarly, entering into a scheme of arrangement with creditors or failing to satisfy a judgment debt suggests financial distress. The IA also considers whether the entity maintains sufficient resources to comply with financial requirements, such as capital, assets, and liquidity requirements.

Furthermore, the IA scrutinizes the involvement of controllers, directors, or partners in other business entities that have faced compulsory winding up, compromises with creditors, or ceased trading with outstanding debts. Convictions for criminal offenses or unresolved criminal charges relevant to fitness and properness, as well as adjudications for fraud, misfeasance, or misconduct, also raise serious concerns. The IA also considers whether a controller, director, or partner fails to meet the criteria for ‘Reputation, character, reliability, honesty and integrity’ or ‘Financial status or solvency’.

The Insurance Ordinance (IO) empowers the IA to make rules regarding the conduct of licensed insurance intermediaries and their qualifications. The IA may also issue codes and guidelines to provide guidance on its functions and the operation of the IO. While non-compliance with these codes and guidelines does not automatically lead to legal proceedings, they serve as important benchmarks for assessing the conduct of insurance intermediaries.

Statement I is correct. According to the Personal Data (Privacy) Ordinance, data subjects have the right to access and correct their personal data held by data users.

Statement II is incorrect. While contracts are a primary means of protecting personal data when outsourcing to a data processor, the PCPD also allows for ‘other means’ of compliance, such as non-contractual oversight and auditing mechanisms.

Statement III is correct. The PCPD recommends that data users be transparent about their data handling practices, informing data subjects that their data may be processed by data processors.

Statement IV is incorrect. While keeping records of transferred data is good practice, the PCPD recommends considering the use of anonymous or dummy data for system testing by data processors before transferring any personal data.

Therefore, statements I and III are correct.

Statement I is correct. According to the Insurance Ordinance (IO), a licensed insurance broker company receiving client monies must maintain at least one client account with an authorized institution, with the word ‘client’ in the account title, and provide written notice to the institution as per section 71 of the IO.

Statement II is correct. Monies received by a licensed insurance broker company from a policyholder as premiums payable to an insurer must be paid into a client account as soon as practicable.

Statement III is incorrect. While licensed insurance broker companies must perform reconciliation of client accounts, the exemption from this requirement for specified insurance broker companies is for 6 months, not 12 months, beginning on the commencement date.

Statement IV is correct. A licensed insurance broker company must keep accounting records sufficient to explain its financial position, enable the preparation of financial statements, account for client monies, and demonstrate compliance with the Insurance Ordinance (IO) and its rules.

Therefore, statements I, II, and IV are correct.

Individual licensees are required to report their Qualified CPD Activities to the Insurance Authority (IA) using a CPD Declaration Form within two months after the end of the assessment period, specifically by September 30th. Any CPD hours exceeding the minimum requirement cannot be carried over to future assessment periods. Licensees must also inform their principals about the reported CPD activities by the same deadline. Furthermore, licensees must retain documentary evidence of their CPD activities for at least three years after the assessment period and provide it to the IA upon request for compliance checks. Principals have a responsibility to ensure their appointed licensees comply with CPD requirements and should verify the information submitted in the CPD Declaration Forms. The transitional CPD arrangements outlined in Annex 3 to GL24 apply to individual licensees during the period from September 23, 2019, to July 31, 2021, with specific requirements varying based on the licensee’s category and licensing date.

Insurers have a responsibility to handle inquiries and complaints fairly and promptly. They must establish documented internal procedures for resolving complaints from policyholders. Membership in the Insurance Complaints Bureau (ICB) is compulsory for authorized insurers offering personal insurance in Hong Kong. The ICB provides an alternative dispute resolution mechanism, including mediation for non-claim related disputes and adjudication for claim-related disputes. The Insurance Claims Complaints Panel, a part of the ICB, adjudicates claim-related complaints. The panel consists of members from both within and outside the insurance industry, ensuring impartiality. The Complaints Panel can award up to HK$1,000,000 against an insurer, who cannot appeal the decision. However, the complainant can seek legal redress if unsatisfied. The Complaints Panel considers policy terms, general principles of good insurance practice, applicable laws, and guidelines issued by the HKFI or ICB, and can look beyond strict policy interpretation to avoid unfair results. The ICB does not handle misconduct of insurance intermediaries.

Insurers have a responsibility to handle inquiries fairly and promptly. They must establish documented internal procedures for addressing complaints from policyholders. Furthermore, insurers are required to be members of the Insurance Complaints Bureau (ICB), which serves as an alternative dispute resolution mechanism for resolving insurance claim disputes between insurers and individual policyholders. The ICB’s jurisdiction does not extend to insurance intermediaries’ misconduct. The Insurance Claims Complaints Panel, a part of the ICB, is empowered to look beyond the strict interpretation of policy terms to ensure a fair and reasonable outcome for the complainant. The composition of the ICB’s Board of Directors and the Complaints Panel reflects independence and impartiality, with representation from both within and outside the insurance industry.

I. **Correct.** The Money Laundering Reporting Officer (MLRO) is a crucial appointment for implementing and overseeing the AML/CFT systems within an insurance institution (II). This role is explicitly mentioned in the provided text as a key component of these systems.
II. **Correct.** Clear policies and procedures are essential for internal reporting, reporting to the JFIU, post-reporting risk mitigation, and preventing tipping off. The text emphasizes the need for these policies and procedures to ensure effective AML/CFT compliance.
III. **Incorrect.** While the text mentions the importance of record-keeping, it specifies that records should be kept for at least five years *after* the end of the business relationship, not from the date of the transaction itself. The record-keeping requirements are outlined in the Anti-Money Laundering and Counter-Terrorist Financing Ordinance (AMLO) and GL3.
IV. **Correct.** Insurance institutions (IIs) are responsible for providing adequate AML/CFT training to their staff. The training should be tailored to the specific risks faced by the II and the roles of the staff. This is a key requirement to ensure staff can effectively implement the AML/CFT systems.

Therefore, statements I, II, and IV are correct.

Statement I is correct. The principle of indemnity seeks to provide financial compensation equivalent to the loss suffered, neither more nor less. This aligns with the core concept of indemnity in insurance.

Statement II is incorrect. While indemnity aims for precise financial compensation, it is not universally applicable. Life insurance and personal accident insurance, for example, do not lend themselves to strict indemnity due to the difficulty in assigning monetary value to human life or bodily injury.

Statement III is correct. As illustrated by the marine cargo example, if the proximate cause of a loss is an uninsured peril (like negligence), the loss may still be recoverable if it sets off a chain of events leading to damage by an insured peril (like water damage).

Statement IV is incorrect. The inclusion of terms like ‘directly or indirectly’ in a policy exclusion broadens the scope of the exclusion. A loss can be excluded even if the excepted peril is only a remote contributory factor, modifying the application of proximate cause rules.

The Insurance Ordinance (IO), formerly known as the Insurance Companies Ordinance (Cap. 41), is the primary legislation regulating the insurance industry in Hong Kong. Let’s analyze each statement:

Statement I: Correct. The Insurance Ordinance (IO) is indeed the main legislation governing the insurance sector in Hong Kong.

Statement II: Incorrect. While the Hong Kong Federation of Insurers plays a significant role in the industry, the Insurance Authority (IA) is the regulatory body established under the Insurance Ordinance to supervise and regulate insurers.

Statement III: Correct. The Insurance Ordinance covers both long-term (life) and general insurance businesses.

Statement IV: Incorrect. The renaming occurred in 2017, not 2015, when the relevant provisions of the Insurance Companies (Amendment) Ordinance 2015 came into operation.

Therefore, statements I and III are correct.

Life and personal accident insurance are typically considered benefit policies, not indemnity policies. This is because it’s impossible to precisely quantify the financial value of a human life or the impact of an injury. Therefore, these policies pay out a predetermined benefit amount as specified in the policy document upon the occurrence of death or a covered injury.

Insurable interest is a key concept in insurance, representing the financial stake one has in the subject matter being insured. While insurable interest is essential for all insurance contracts to be valid, life and personal accident insurance are unique in that they are generally regarded as having an unlimited insurable interest. This means the policy benefit is not strictly tied to a provable financial loss in the same way as property insurance.

Indemnity aims to restore the insured to their pre-loss financial position. Property insurance policies often allow insurers to settle claims through various methods, including cash payment, repair, replacement, or reinstatement. Cash payment involves providing the insured with money to cover the loss. Repair involves paying a repairer directly to fix the damaged property. Replacement involves providing a new item to replace the damaged one. Reinstatement means restoring the property to its condition immediately before the damage.

Salvage refers to the remaining value of damaged property after a loss. When determining the indemnity amount, the value of any salvage is taken into account. This can be done by deducting the salvage value from the payment to the insured, who then keeps the salvage, or by the insurer paying the full amount and taking possession of the salvage to dispose of it for their own account.

Abandonment, primarily used in marine insurance, involves the insured surrendering the insured property to the insurer in exchange for a total loss payment. While common in marine insurance, it’s usually excluded in other property insurance policies. The insurer then benefits from any residual value of the abandoned property.

Policy provisions can limit the indemnity provided. Average clauses reduce the payout if the property is underinsured. Policy excesses or deductibles require the insured to bear a specified amount of each loss. These provisions ensure that the insured shares in the risk and encourages them to insure adequately.

According to the Personal Data (Privacy) Ordinance, a data user must comply with a data subject’s request to cease using their personal data for direct marketing at any time. Furthermore, the data user must also comply with a request to stop providing the data subject’s personal data to others for direct marketing purposes and notify those recipients to cease using the data. Contraventions of these requirements are offenses, with penalties depending on whether the contravention involves the provision of personal data for gain. The maximum penalty for contraventions involving gain is a fine of HK$1,000,000 and imprisonment for 5 years, while other contraventions carry a maximum penalty of a fine of HK$500,000 and imprisonment for 3 years. The Ordinance also addresses the offense of disclosing personal data obtained without the data user’s consent, particularly when done with the intent to obtain gain or cause loss to the data subject, or when the disclosure causes psychological harm. The maximum penalty for this offense is a fine of HK$1,000,000 and imprisonment for 5 years. Defenses against this offense include reasonable belief that the disclosure was necessary for preventing or detecting crime, was required by law or court order, or that the data user had consented to the disclosure. Data subjects can complain to the Privacy Commissioner for Personal Data (PCPD) about suspected breaches of the Ordinance and sue wrongful data users for compensation. Exemptions from the Ordinance exist for personal data held for domestic or recreational purposes, certain employment-related personal data, and when application of the Ordinance is likely to prejudice certain public or social interests such as security, defense, and international relations.

I. Correct. According to the Insurance Authority’s Guideline on Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) (GL3), an insurer should appoint a Money Laundering Reporting Officer (MLRO) as part of its AML/CFT systems.
II. Correct. Insurers are required to implement clear policies and procedures regarding internal reporting, reporting to the Joint Financial Intelligence Unit (JFIU), post-reporting risk mitigation, and prevention of tipping off, as outlined in GL3.
III. Correct. Maintaining proper records of internal reports and Suspicious Transaction Reports (STRs) is a crucial component of an insurer’s AML/CFT obligations under the AMLO and GL3.
IV. Incorrect. While insurers should provide AML/CFT training to their staff, GL3 emphasizes tailoring the scope and frequency of training to the specific risks faced by the insurer and the job functions of the staff. It does not mandate that all staff receive the same level of advanced certification.

Therefore, statements I, II, and III are correct.

When a licensed insurance broker believes a client’s decision regarding an insurance policy is unsuitable, the broker has specific obligations to fulfill under the Insurance Ordinance (IO) and related guidelines.

Statement I: The broker must provide a clear and comprehensive explanation to the client detailing why the decision is considered unsuitable. This explanation should cover the potential risks, drawbacks, or inconsistencies of the client’s choice in relation to their needs and circumstances. This is crucial for informed decision-making.

Statement II: The broker must acknowledge and document that the final decision rests solely with the client, even if the broker deems it unsuitable. This reinforces the client’s autonomy and ensures that the broker is not imposing their own preferences. The broker should retain a record confirming the client’s decision was made against their advice.

Statement III: While the broker must respect the client’s decision, they are not obligated to proceed with implementing the unsuitable decision if doing so would violate regulatory requirements or ethical standards. The broker has a responsibility to ensure compliance with the Insurance Ordinance and related regulations, and cannot facilitate actions that would breach these obligations. The broker should document the reasons for not proceeding if this situation arises.

Therefore, statements I and II are correct.

Statement I is correct. Charging higher premiums to women solely based on gender stereotypes related to driving ability constitutes unfair discrimination, as highlighted in the IIQE Paper 1 materials.

Statement II is incorrect. The Drug Trafficking (Recovery of Proceeds) Ordinance (Cap. 405) and the Organized and Serious Crimes Ordinance (Cap. 455) criminalize dealing with property known or reasonably believed to represent proceeds of indictable offenses or drug trafficking. This is related to money laundering, not terrorist financing.

Statement III is correct. Proliferation financing involves providing funds or financial services for the manufacture, acquisition, or use of nuclear, chemical, or biological weapons, as defined in the IIQE Paper 1 materials.

Statement IV is incorrect. Placement is the initial stage of money laundering where illegal cash is introduced into the financial system. Layering involves complex transactions to disguise the source of the money, and integration is the stage where the money appears legitimate. Therefore, the statement incorrectly describes layering.

Conclusion: Statements I and III are correct.

Life insurance underwriting is typically a one-time process due to the insurer’s inability to cancel the policy and the need for the insured’s consent for changes. This critical nature often leads to centralized underwriting. General insurance, with its wide range of coverage, allows for policy reviews and cancellations upon renewal, making decentralized underwriting more feasible. Underwriting manuals and guidelines are essential for staff, requiring extensive research and development. ‘Target risks’ can refer to desirable business in life insurance (e.g., healthy young professionals) or undesirable business in general insurance (e.g., high-hazard risks). ‘Stop-lists’ identify types of business to avoid, demanding underwriting expertise and sensitivity to discrimination issues. Policy administration differs significantly between life and general insurance, with life insurance policies requiring production at claim time and verification processes being crucial. Claims handling in life insurance is often centralized due to the complexity and potential for disputes, while general insurance claims handling is more decentralized due to the wider range and smaller average claim size. The payment of the first premium is critical for the existence of a life insurance contract.

Statement I is correct. Policy conditions outline the framework of the insurance policy, clarifying the relationships, rights, and duties of both the insured and the insurer. This is a fundamental aspect of insurance contracts.

Statement II is incorrect. Policy limits define the maximum amount the insurer will pay out for a covered loss, such as the sum insured. They are not related to the powers of intervention granted to the Insurance Authority.

Statement III is incorrect. The practical classification of insurance refers to how an insurer categorizes its business internally, often based on the source of the business (e.g., direct, broker-produced, agent-produced). It does not directly relate to the consideration paid by the insured for coverage.

Statement IV is correct. The premium is the payment made by the insured to the insurer in exchange for the insurance coverage. This is the consideration for the insurance contract.

Therefore, statements I and IV are correct.

The Insurance Authority (IA) assesses the fitness and properness of insurance intermediaries based on various criteria, including their reputation, character, financial status, and solvency. When evaluating a business entity, the IA considers factors such as whether the entity is subject to insolvency proceedings, has entered into arrangements with creditors, or maintains sufficient resources to meet financial requirements. The IA also considers whether the business entity, or its controllers, directors, or partners, have been involved in legal or regulatory breaches, criminal offenses, or civil liabilities related to fraud or misconduct. The IA has the power to make rules and publish codes or guidelines to regulate the insurance industry. However, non-compliance with codes and guidelines does not automatically lead to legal proceedings. The IA also considers other regulatory measures when assessing the fitness and properness of insurance intermediaries.

Statement I is correct because the IA must be satisfied that a company applying to be a licensed insurance broker company is or will be able to comply with the requirements in relation to capital, net assets, professional indemnity insurance, and the keeping of separate client accounts and proper books and accounts as set out in the IO and any rules made under section 129 of the IO.

Statement II is correct because the IA will normally not allow a person to be appointed as a responsible officer of more than one licensed insurance broker company unless the companies concerned belong to the same group of companies or have common shareholder(s), or there is any other justification acceptable to the IA. The IA will consider each application on a case -by-case basis.

Statement III is incorrect because non-compliance with codes and guidelines is not by itself a cause for judicial or other proceedings.

Therefore, statements I and II are correct.

The Hong Kong Federation of Insurers (HKFI) plays a crucial role in the insurance industry. Statement I is correct because the HKFI aims to promote the interests of insurers and reinsurers operating in Hong Kong. Statement II is also correct as the HKFI’s mission includes promoting insurance to the public and fostering consumer confidence through high ethical and professional standards. Statement III is incorrect because while the HKFI previously managed the Insurance Agents Registration Board (IARB), the Insurance Authority assumed the regulation of insurance intermediaries on 23 September 2019. Therefore, statements I and II are correct.

Statement I is correct. Payment of outstanding bills is a core function of the accounts department, ensuring financial obligations are met.
Statement II is correct. Collection of unpaid premiums is crucial for maintaining the insurance company’s revenue stream and financial health.
Statement III is incorrect. Determining whether a risk is insurable falls under the responsibility of the underwriting department, not the accounts department.
Statement IV is incorrect. Arranging the launch of a new policy product is typically the responsibility of the marketing or product development departments, not the accounts department.
Therefore, statements I and II are correct.

Statement I is correct. ‘Abandonment’ in marine insurance allows the insured to surrender rights to the insurer in exchange for a total loss settlement, as defined in the glossary.
Statement II is incorrect. ‘Academic Classification of Insurance’ categorizes insurance by type (person, property, pecuniary interest, liability), not by risk level.
Statement III is correct. ‘Acceptance’ in contract law signifies agreement to an offer, forming a key element of a valid contract.
Statement IV is incorrect. ‘Accounting and Investment’ refers to the insurer’s financial management functions, not policy underwriting.
Therefore, statements I and III are correct.

I: Correct. According to the Insurance Authority (IA), a proposed responsible officer of a licensed insurance agency is exempt from specified education or professional qualifications if they were a Responsible Officer registered with the IARB at any time before 23 September 2019.
II: Correct. The IA stipulates that a proposed responsible officer of a licensed insurance broker company is exempt from certain qualifications if they were a Chief Executive registered with the CIB or PIBA at any time before 23 September 2019.
III: Incorrect. While the IA expects a responsible officer to possess experience commensurate with the business’s nature and scale, the minimum experience is generally 5 years in the insurance industry, including at least 2 years of management experience. The statement mentions 3 years of management experience, which does not align with the IA’s general expectation.
IV: Incorrect. The IA assesses an individual’s competence, including whether they have been dismissed or requested to resign for misconduct, incompetence, negligence, or mismanagement. The IA considers this as evidence that the individual may be incompetent or negligent. The statement suggests the opposite, which is incorrect.

Therefore, statements I and II are correct.

A legally binding agreement necessitates several key elements. An ‘offer’ represents a clear proposition made by one party to another. ‘Acceptance’ signifies the unconditional agreement to the terms of the offer. ‘Consideration’ involves something of value exchanged between the parties, demonstrating a mutual benefit or detriment. ‘Capacity’ refers to the legal competence of the parties to enter into a contract, meaning they must be of sound mind, legal age, and not otherwise restricted from contracting. All these elements are crucial for a simple contract to be deemed valid and enforceable under Hong Kong law. Therefore, all statements are correct.

Statement I is correct. Policy conditions outline the framework of the insurance policy, clarifying the relationships, rights, and duties of both the insured and the insurer. This is a fundamental aspect of insurance contracts.

Statement II is incorrect. Policy limits, such as the sum insured, define the maximum amount the insurer will pay out for a covered loss. They are not related to the powers of intervention granted to the Insurance Authority (IA).

Statement III is incorrect. The practical classification of insurance refers to the insurer’s internal categorization of business, often based on the source of the business (e.g., direct, broker-produced, agent-produced). It does not define the consideration paid by the insured for coverage.

Statement IV is incorrect. Product research involves monitoring and developing existing and new insurance products to align with market trends and competition. It is not related to professional indemnity insurance, which covers professionals against liability arising from negligence.

Therefore, only statement I is correct.

The equitable doctrine of contribution arises in situations of double insurance where multiple policies cover the same interest and loss. Let’s analyze each statement:

Statement I: Correct. Contribution is indeed a principle applied when an insured party has multiple insurance policies covering the same risk and seeks indemnity from more than one insurer. This is a core aspect of the doctrine of contribution.

Statement II: Incorrect. The ‘rateable proportion’ refers to the share of the loss that each insurer is responsible for, and the sum of all insurers’ rateable proportions equals 100% of the insured’s loss. It is not the amount the insured gets paid.

Statement III: Correct. Contribution is a corollary of indemnity because it applies to policies that provide indemnity for a loss, not benefit policies like life insurance. The policies must aim to compensate for the actual loss suffered.

Statement IV: Incorrect. Contribution applies when policies cover the same interest. In the warehouse example, the merchant’s policy covers their ‘interest as owner,’ while the warehouse operator’s policy covers their ‘interest as bailee.’ These are different interests, so contribution does not apply.

Therefore, statements I and III are correct.

Statement I is correct. Customer service departments handle various inquiries, some unrelated to the company’s business, requiring perception and tact.
Statement II is correct. Customer service plays a crucial role in shaping the public’s perception of a company.
Statement III is incorrect. While customer service may initially handle requests for documentation, the underwriting department is responsible for the selection of risks to be insured and the determination of the terms under which the insurance is given.
Statement IV is incorrect. While customer service handles complaints, underwriting is not a primary function of customer service.
Therefore, only statements I and II are correct.

I. Correct. A contract is considered voidable if one party has the option to rescind it due to factors like misrepresentation or duress. This aligns with the definition of defective contracts under IIQE Paper 1.
II. Incorrect. An unenforceable contract is valid in its formation but cannot be enforced in court due to legal impediments, such as the lack of written evidence when required by the Statute of Frauds. While it’s a type of defective contract, it doesn’t necessarily mean it lacks all legal effect. For example, parties might still voluntarily perform the obligations.
III. Correct. A contract is considered void if it lacks legal effect from its inception, often due to illegality or fundamental mistake. This fits the description of defective contracts.
IV. Incorrect. A valid contract is legally binding and enforceable, possessing all the necessary elements such as offer, acceptance, consideration, and intention to create legal relations. It is not a defective contract.

Therefore, statements I and III are correct.

When an insured party has multiple insurance policies covering the same risk, the principle of contribution comes into play to ensure they do not profit from the loss. The ‘3/17 event of double insurance’ refers to situations where multiple policies exist. Several clauses and conditions modify how contribution operates. A ‘non-contribution clause’ stipulates that a particular policy will not contribute if other more specific insurance exists. A ‘partial contribution condition,’ exemplified by the ‘Marine Clause’ in standard fire policies, dictates that the fire policy only covers losses exceeding the marine policy’s compensation. Subrogation, a related concept, allows the insurer to pursue rights against third parties responsible for the loss, preventing the insured from receiving double compensation. Subrogation rights can arise in tort, contract, under statute (like the Employees’ Compensation Ordinance), or in salvage. Subrogation is applicable only if indemnity applies. Insurers cannot recover more through subrogation than they have paid out as indemnity.

Let’s analyze each statement regarding the obligations of a licensed insurance agent under the IIQE Paper 1 syllabus.

Statement I: This statement is correct. According to the guidelines, a licensed insurance agent must provide the client with relevant information on the key features of the insurance product, including the name of the insurer.

Statement II: This statement is correct. The agent should explain the principle of utmost good faith and remind the client that non-disclosure of material facts may result in policy invalidation or claim repudiation.

Statement III: This statement is incorrect. While agents must disclose fees and charges, they are required to disclose all fees and charges other than premiums, not including premiums.

Statement IV: This statement is correct. A licensed insurance agent should adequately explain the similarities and differences between insurance products when making comparisons, ensuring the comparison is accurate and not misleading.

Therefore, statements I, II, and IV are correct.

When a client is referred to a licensed insurance agent by another person (the referrer), several key disclosures are required to protect the client’s interests and ensure transparency. First, the agent must inform the client that they (the agent) are solely responsible for arranging the insurance policy and that the client should only deal directly with the agent for this purpose. This prevents the referrer from inappropriately influencing the insurance arrangement. Second, the agent must clarify that the referrer does not represent the agent and should not be involved in arranging the policy. This reinforces the agent’s direct responsibility to the client. Third, the agent must disclaim all liability for any advice given by the referrer regarding the insurance policy. This protects the agent from being held responsible for potentially unsuitable advice from an external party. Finally, the agent must ensure that premium payments are made directly to the insurer or, if permitted, to the agent, but never to the referrer. This safeguards the client’s funds and prevents potential misappropriation. However, these disclosure requirements do not apply in two specific scenarios: when a client is referred to a licensed insurance agency by its appointed licensed technical representative (agent), or when the referral is made by a licensed insurance broker (acting as the client’s agent) for the purpose of arranging an insurance policy with the agent’s appointing insurer. These exceptions recognize existing professional relationships and regulatory oversight. Understanding these disclosure requirements and their exceptions is crucial for licensed insurance agents to maintain ethical standards and comply with regulatory guidelines, as outlined in the IIQE Paper 1 syllabus.