IIQE Paper 1 Principles and Practice of Insurance Examination Quiz 08 Advanced

The Prevention of Bribery Ordinance (POBO) in Hong Kong addresses various forms of corruption. Let’s analyze each statement:

Statement I: This statement is correct. The POBO prohibits offering advantages to public servants, even without corrupt intent, to avoid accusations of bribery under Section 8. This is to maintain impartiality and prevent any perception of undue influence.

Statement II: This statement is also correct. Indirect bribery, where bribes are offered or accepted through a third party, is illegal under the POBO. The key factor is the intent to influence the agent’s actions related to their principal’s business.

Statement III: This statement is correct. Section 9 of the POBO covers cross-boundary bribery. If any part of the bribery act (offering, soliciting, accepting, or agreeing) occurs in Hong Kong, both the offeror and recipient can be prosecuted.

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

A trustee is legally obligated to manage property or assets for the benefit of another party, known as the beneficiary. This role involves a fiduciary duty, requiring the trustee to act in the best interests of the beneficiary, with honesty, integrity, and good faith. The trustee must avoid conflicts of interest and ensure the proper management and preservation of the trust assets.

Underwriting is the process insurance companies use to assess the risk associated with insuring an individual or entity. It involves evaluating various factors to determine whether to offer coverage and, if so, at what premium. This process helps insurers manage their risk exposure and maintain financial stability.

An unenforceable contract is an agreement that a court of law will not uphold. This can occur for various reasons, such as a lack of legal capacity of one of the parties, the presence of illegal terms, or the absence of essential elements like consideration. Because it cannot be enforced, neither party can seek legal remedies for breach of the agreement.

Unfair discrimination in insurance refers to the practice of applying different terms or conditions to similar risks without a justifiable basis. This violates principles of fairness and equity. Insurance companies are expected to assess risks based on objective and actuarially sound factors, not on arbitrary or discriminatory criteria. For example, charging different premiums based on gender without a valid actuarial basis would be considered unfair discrimination.

An uninsured peril is a cause of loss that is neither specifically included nor specifically excluded in an insurance policy. If damage results solely from an uninsured peril, the policy will not provide coverage. However, if an insured peril is the proximate cause of the loss, even if an uninsured peril contributes, the damage may be recoverable. For example, if a fire (an insured peril) causes water damage while being extinguished, the water damage may be covered even though water damage itself might be an uninsured peril under a standard fire policy.

Unit-linked insurance is a type of policy where the policyholder’s contributions, after deductions for expenses and premiums, are invested in units of an investment fund. The value of the policy is directly linked to the performance of these units. This means the policy’s value can fluctuate based on market conditions and the performance of the underlying investment fund.

Utmost good faith is a fundamental principle in insurance contracts, requiring both the insurer and the insured to disclose all material information relevant to the risk being insured, whether specifically asked or not. This duty ensures transparency and fairness in the insurance transaction, allowing both parties to make informed decisions. Failure to disclose material information can render the contract voidable.

A valued policy is an insurance policy where the insurer and insured agree on the value of the insured item at the time the policy is issued. This agreed value is specified in the policy and serves as the basis for any claim settlement, regardless of the actual market value at the time of loss. Valued policies are commonly used in marine insurance for items like artwork or antiques where determining market value can be difficult.

Vicarious liability refers to a situation where one person is held legally responsible for the actions or omissions of another person. This typically arises in the context of an agency relationship, where a principal can be held liable for the acts of their agent, provided the agent was acting within the scope of their authority.

A void contract is an agreement that has no legal effect from its inception. It is considered as if it never existed and cannot be enforced by either party. Common reasons for a contract to be void include illegality, impossibility of performance, or a fundamental lack of agreement.

A voidable contract is an agreement that is initially valid and legally binding but can be cancelled or rescinded by one of the parties due to certain circumstances, such as misrepresentation, duress, or undue influence. The aggrieved party has the option to either affirm the contract or declare it void. If they choose to void the contract, it is treated as if it never existed. However, the party must make this decision within a reasonable time, or the contract becomes fully valid.

The Contracts (Rights of Third Parties) Ordinance (Cap. 623) addresses the balance between protecting third-party interests and the freedom of contracting parties. It generally restricts the ability of contracting parties to rescind or vary a contract term benefiting a third party after the third party has assented to or relied upon it, provided the promisor is aware of the reliance or could reasonably foresee it. However, this statutory limitation can be overridden by an express term in the contract that allows for variation or rescission without the third party’s consent, provided the third party is aware of the term or reasonable steps were taken to make them aware.

Agency law, broader than its application to insurance agents, dictates that a principal is bound by the authorized actions of their agent. This principle stems from the idea that ‘he who acts through another is himself performing the act.’ The principal may also be vicariously liable for the agent’s actions or omissions. An agency relationship can arise through agreement (express or implied) or by ratification, where the principal retrospectively approves an act performed by the agent without prior authority. The law of agency governs the relationship between a principal and an agent, and it involves considering contracts between the agent and principal, and between the principal and a third party.

When a licensed insurance agent has outside business interests, conflicts can arise. The agent must prioritize the client’s interests above their own. If a conflict is unavoidable, it must be disclosed to the client promptly. General Principle 8 emphasizes the need for safeguards to protect client assets. Agents should only handle premium payments within their authorized scope, as defined by their appointing insurer or agency. Premiums received must be safeguarded and kept separate from the agent’s personal funds, with proper records maintained. Cash payments should only be accepted under specific conditions, such as when other payment methods are not feasible and with the explicit authorization of the appointing insurer or agency. Licensed insurance agencies are required to have controls and procedures in place to ensure compliance with the Agents’ Code, including proper handling of complaints, record-keeping, and reporting of incidents to the Insurance Authority (IA). The agency’s organizational structure should ensure that client interests are not prejudiced, with clear roles and responsibilities for senior management.

The Insurance Authority (IA) assesses the fitness and properness of individuals and business entities to carry on regulated insurance activities. This assessment includes evaluating an individual’s past conduct, financial status, and other relevant matters.

An individual’s fitness and properness can be questioned if they have been dismissed or requested to resign from a position due to misconduct, negligence, incompetence, or mismanagement. This demonstrates a potential lack of integrity or competence, which are crucial for maintaining public trust in the insurance industry.

Furthermore, involvement in a business entity that has been compulsorily wound up or has made compromises with creditors can also raise concerns about an individual’s financial responsibility and business acumen. The IA also considers whether an individual has been held civilly liable for fraud, misfeasance, or other misconduct related to the formation or management of a business entity.

An individual’s failure to comply with legal or regulatory requirements, conviction of a criminal offense, or adjudication of civil liability for fraud, misfeasance, or misconduct, whether directly or through a business entity they control, directs, or partner with, are all significant factors that the IA considers.

The IA also assesses an individual’s financial status, including whether they have entered into a voluntary arrangement with creditors, been adjudicated bankrupt, or failed to satisfy a judgment debt.

Finally, the IA requires individual licensees to be Hong Kong permanent residents or hold appropriate immigration visas or permits that allow them to carry on regulated activities in Hong Kong. This ensures that licensees are subject to Hong Kong’s legal and regulatory framework.

Therefore, the correct answer is option (a).

Statement I is correct. Ratification, in the context of agency law, involves the principal retrospectively approving an act performed by an agent who initially lacked the authority to act on their behalf. This aligns with the definition provided in the IIQE Paper 1 syllabus.

Statement II is incorrect. The Insurance Authority (IA), established under the Insurance Companies (Amendment) Ordinance 2015, took over the regulation of insurance intermediaries from the self-regulatory organizations (SROs) on 23 September 2019. The statement incorrectly suggests the SROs still have regulatory power.

Statement III is correct. Reinstatement in property insurance refers to restoring the insured property to its condition immediately before the damage occurred. This is a method of providing indemnity as defined in the IIQE Paper 1 syllabus.

Statement IV is incorrect. Restricted Scope Travel Business, as defined under section 64ZZC(6) of the IO, specifically excludes the effecting of annual travel insurance policies. The statement incorrectly includes annual travel insurance policies.

To be eligible for licensing as an individual insurance agent under the Insurance Ordinance (IO), an applicant must meet several criteria. Firstly, the applicant must be deemed a ‘fit and proper’ person, demonstrating the competence, honesty, and fairness required to conduct regulated activities. Secondly, the applicant must be appointed as an agent by at least one authorized insurer. Critically, the applicant must not already hold certain other licenses, such as an individual insurance agent license, an insurance broker company license, a technical representative (agent) license, or a technical representative (broker) license. Furthermore, they should not be in the process of applying for any of these licenses. This ensures individuals hold only one type of intermediary license at a time. The Insurance Authority (IA) assesses these criteria to maintain the integrity and professionalism of the insurance industry.

Statement I is correct because the applicant must be deemed a ‘fit and proper’ person by the IA.
Statement II is correct because the applicant must be appointed as an agent by at least one authorized insurer.
Statement III is correct because the applicant cannot hold or be applying for other conflicting licenses.

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

Statement I is correct. Short-tail business, such as fire insurance, involves claims that arise and are notified relatively quickly after the insured event. This aligns with the definition provided in the IIQE Paper 1 syllabus.

Statement II is incorrect. A simple contract can be created verbally, in writing (not under seal), or inferred from conduct. The statement incorrectly limits it to only written agreements.

Statement III is correct. The solvency margin represents the extent to which an insurer’s assets exceed its liabilities. Insurers in Hong Kong must maintain a solvency margin that meets or exceeds the ‘relevant amount’ as per regulatory requirements.

Statement IV is incorrect. Speculative risk involves the possibility of both gain and loss, not just loss. Pure risk involves only the possibility of loss.

Therefore, statements I and III are correct.

Let’s analyze each statement regarding the obligations of a licensed insurance agent under the Insurance Ordinance and relevant codes:

Statement I: Correct. According to the Insurance Authority’s guidelines, a licensed insurance agent must provide the client with relevant information on the key features of the recommended insurance product, including the name of the insurer.

Statement II: Correct. As per the guidelines, a licensed insurance agent should explain the principle of utmost good faith to the client, emphasizing that non-disclosure of material facts may lead to policy invalidation.

Statement III: Incorrect. While agents must disclose fees and charges, they are required to disclose all fees and charges (other than premiums) to be paid by the client, if any. This statement incorrectly suggests that only fees exceeding a certain percentage need to be disclosed.

Statement IV: Correct. A licensed insurance agent’s business card, whether physical or digital, must display their name as it appears on their Hong Kong identity card or passport, their license number, the type of license, and the name of their appointing insurer or agency.

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

Statement I is correct. According to the Insurance Ordinance, the clarity and prominence of disclosure should be what a reasonable person would require to decide whether to enter into dealings covered by section 68.

Statement II is incorrect. A licensed technical representative (agent) cannot be a licensed technical representative (agent) of another licensed insurance agency, as this would violate restrictions on multiple capacities.

Statement III is correct. A licensed technical representative (broker) must not act beyond the licensed insurance broker company’s scope of licensed business, as this is a defined restriction.

Statement IV is incorrect. A controller in a partnership is defined as an individual who is entitled to or controls, directly or indirectly, not less than 15% of the capital or profits of the partnership. The statement incorrectly mentions 5%.

Therefore, statements I and III are correct.

The Insurance Authority (IA) assesses the fitness and properness of individuals and business entities to carry on regulated insurance activities. This assessment includes evaluating an individual’s past conduct, financial status, and other relevant matters.

An individual’s fitness and properness can be questioned if they have been dismissed or requested to resign from a position due to misconduct, negligence, incompetence, or mismanagement. This demonstrates a potential lack of integrity or competence, which are crucial for maintaining public trust in the insurance industry. The IA also considers whether an individual was a controller, director, or partner of a business entity that was compulsorily wound up or made arrangements with creditors, especially if creditors did not receive full settlement. This indicates potential financial mismanagement or a lack of business acumen. Furthermore, if an individual has been found civilly liable for fraud, misfeasance, or other misconduct related to the formation or management of a business entity, it raises serious concerns about their ethical standards and professional conduct. The IA also considers instances where a business entity, under the individual’s control, failed to comply with legal or regulatory requirements, or was convicted of a criminal offense relevant to fitness and properness.

The IA also assesses the financial status of individuals, considering factors such as voluntary arrangements with creditors, bankruptcy proceedings, and failure to satisfy judgment debts. These factors indicate potential financial instability, which could compromise their ability to fulfill their obligations in the insurance industry.

Finally, the IA requires individual licensees to be either Hong Kong permanent residents or hold an appropriate immigration visa or permit that allows them to carry on regulated activities in Hong Kong. This ensures that licensees are legally authorized to work in the insurance industry in Hong Kong.

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

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

Statement I: 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: Correct. The agent should explain the principle of utmost good faith to the client, emphasizing that non-disclosure of material facts can invalidate the policy.

Statement III: Incorrect. While agents must disclose fees and charges, they are required to disclose all fees and charges (other than premiums) to be paid by the client, if any. The statement is too restrictive.

Statement IV: Correct. A licensed insurance agent should provide the information in (a) and (b) above before or (if this is not feasible) as soon as reasonably practicable after commencing any regulated activity in relation to the client.

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

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

Statement I: 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: Correct. The agent should explain the principle of utmost good faith to the client, emphasizing that non-disclosure of material facts may lead to policy invalidation or claim repudiation.

Statement III: Incorrect. While agents must disclose fees and charges, they are required to disclose the level of premium and the period for which the premium is payable. The agent is not required to disclose the commission the agent receives from the insurer.

Statement IV: Incorrect. While business cards must include the agent’s name, license number, and type of license, it is not required to include the agent’s photograph.

Therefore, only statements I and II are correct.

Statement I is correct. According to Schedule 1 of the Insurance Ordinance (IO), Long Term Business includes Life and annuity insurance, excluding Class C.
Statement II is incorrect. While Personal Accident insurance falls under General Business, it is designated as Class 1, not Class 3, under the Insurance Ordinance.
Statement III is correct. The Insurance Ordinance classifies insurance into Long Term Business and General Business.
Statement IV is incorrect. Tontines are classified as Long Term Business under Class E, not General Business, according to the Insurance Ordinance.
Therefore, statements I and III are correct.

Statement I is correct. Insurance can act as a means of savings, particularly in the case of life insurance policies with a savings component.
Statement II is correct. The insurance industry is a significant employer in Hong Kong, providing a wide range of job opportunities.
Statement III is correct. Insurance encourages economic development by providing financial security and enabling businesses to take risks.
Statement IV is correct. Insurance companies often implement risk management strategies and promote safety measures, leading to a reduction in accidents and losses.
Therefore, all four statements are correct.

Statement I is correct. An offer is a clear expression of willingness to enter into a contract on specific terms, demonstrating an intention to be bound upon acceptance.
Statement II is correct. Acceptance is the unqualified agreement to the terms of the offer, communicated to the offeror, creating a binding agreement.
Statement III is correct. Consideration is something of value exchanged by each party to the contract. It can be a benefit to one party or a detriment to the other. Without consideration, an agreement is generally not enforceable as a contract.
Statement IV is correct. Capacity refers to the legal ability of a party to enter into a contract. Certain individuals, such as minors or those with mental incapacities, may have limited or no capacity to contract. Therefore, all four elements are essential for a valid simple contract.

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

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. This duty exists at the time of application, renewal, and when alterations to the policy are requested.

Analyzing each statement:
I. Correct. The duty of utmost good faith does revive at renewal.
II. Incorrect. The duty of utmost good faith applies when alterations are requested during the policy’s term, obligating the insured to disclose relevant material facts.
III. Correct. A material fact is defined as any circumstance that would influence a prudent insurer in determining whether to accept a risk or fixing the premium.

Therefore, statements I and III are correct.

This question explores the principle of subrogation in insurance, particularly how proceeds are shared between the insurer and the insured when the insurer has provided less than a full indemnity due to policy limitations.

(1) Excess: When the insured is responsible for an initial loss amount (excess) before the insurer pays, any subrogation recovery is first allocated to the insurer to cover their payment. If the recovery exceeds the insurer’s payment, the insured is entitled to the remainder up to their initial loss amount.

(2) Limit of Liability: If the insured’s policy has a limit of liability and they incur a loss exceeding this limit, any recovery from a third party first goes to the insured to cover their out-of-pocket expenses beyond the policy limit. Once the insured is fully compensated for their uncovered loss, any further recovery goes to the insurer up to the amount they paid out.

(3) Average: In cases of underinsurance, where the insured only insures a portion of the risk, they are considered a co-insurer for the uninsured portion. Therefore, they are entitled to a proportional share of any subrogation proceeds, reflecting their share of the risk.

Based on these principles:
– Statement I is correct: In an ‘excess’ scenario, the insurer is prioritized for subrogation proceeds up to the amount they paid out.
– Statement II is incorrect: In a ‘limit of liability’ scenario, the insured is prioritized for subrogation proceeds to cover losses exceeding the policy limit, before the insurer receives anything.
– Statement III is correct: In an ‘average’ scenario (underinsurance), the insured is entitled to a portion of the subrogation proceeds proportional to their underinsurance.

Therefore, statements I and III are correct.

Statement I is correct. The OSCO and DTROP indeed make it an offense to fail to disclose knowledge or suspicion of property related to an indictable offense or drug trafficking, respectively, with a maximum penalty of 3 months imprisonment and a HK$50,000 fine.

Statement II is correct. ‘Tipping off’ under the OSCO and DTROP is an offense where disclosing information about a disclosure that could prejudice an investigation carries a maximum penalty of 3 years imprisonment and a fine.

Statement III is incorrect. While the UNATMO addresses terrorist financing, the maximum penalty for providing or collecting property to commit terrorist acts, or making financial services available to terrorists, is 14 years imprisonment and a fine of unlimited amount, not 7 years.

Statement IV is incorrect. The WMD(CPS)O prohibits providing services connected to proliferation financing, and the maximum penalty is imprisonment for 7 years and a fine of unlimited amount. The statement incorrectly mentions 3 years imprisonment.

Licensed insurance intermediaries, including both agencies and broker companies, are subject to specific conduct requirements under the Insurance Ordinance. These requirements aim to protect policyholders and maintain the integrity of the insurance market.

Key obligations include:

1. **Suitability:** Intermediaries must consider the individual circumstances of each policyholder or potential policyholder to ensure that the recommended insurance product is appropriate for their needs. This aligns with the principle of providing suitable advice, as outlined in the Insurance Ordinance.

2. **Disclosure:** Intermediaries are required to disclose all information necessary for policyholders or potential policyholders to make informed decisions. This includes details about the policy’s coverage, exclusions, and any associated fees or charges. The disclosure requirements are designed to promote transparency and prevent mis-selling.

3. **Conflict of Interest:** Intermediaries must avoid conflicts of interest between themselves and their clients. If a conflict of interest exists, it must be disclosed to the policyholder or potential policyholder. This requirement aims to ensure that intermediaries act in the best interests of their clients.

4. **Proper Accounting:** Intermediaries are responsible for promptly and properly accounting for the assets of policyholders or potential policyholders. This includes handling premiums, claims payments, and other financial transactions in a responsible and transparent manner.

5. **Compliance with IA Rules:** Intermediaries must comply with all rules and regulations prescribed by the Insurance Authority (IA) under the specified sections of the Insurance Ordinance. This includes adhering to the IA’s guidelines on conduct, licensing, and other regulatory matters.

In addition to these general conduct requirements, licensed insurance agencies and broker companies have specific obligations related to establishing and maintaining proper controls and procedures. These obligations include:

* Establishing and maintaining proper controls and procedures for securing compliance with the conduct requirements by the agency/company and its licensed technical representatives (agents/brokers).
* Using best endeavors to secure observance with the said controls and procedures by its licensed technical representatives (agents/brokers).
* Ensuring that its responsible officer has sufficient authority for carrying out the prescribed responsibilities.
* Providing its responsible officer with sufficient resources and support for carrying out the prescribed responsibilities.
* The responsible officer must use his/her best endeavors to ensure that the agency/company has established and maintains proper controls and procedures for securing compliance with the conduct requirements by the agency/company and its licensed technical representatives (agents/brokers).
* The responsible officer must use his/her best endeavors to ensure that the agency/company uses its best endeavors to secure observance with the controls and procedures by its licensed technical representatives (agents/brokers).

It’s important to note that failure to comply with these conduct requirements does not automatically lead to judicial proceedings. However, the IA may take non-compliance into account when assessing whether an intermediary is a fit and proper person to remain licensed.

The IA may also publish codes of conduct to provide guidance on the practices and standards expected of licensed insurance intermediaries. While these codes of conduct do not have the force of law, failure to comply with them may be considered when determining an intermediary’s fitness and propriety.

**Analyzing the statements:**

* **Statement I:** This statement accurately reflects the requirement for intermediaries to consider the individual circumstances of policyholders to ensure the suitability of the insurance product.
* **Statement II:** This statement correctly describes the obligation of intermediaries to disclose necessary information to policyholders for informed decision-making.
* **Statement III:** This statement accurately reflects the requirement for intermediaries to avoid conflicts of interest and disclose any such conflicts to policyholders.

**Conclusion:**
Statements I, II, and III are correct.

The principal owes several duties to their agent. These include providing agreed-upon remuneration (such as commission or bonuses) within a reasonable timeframe or as specified in their agreement. The principal is also obligated to reimburse the agent for reasonable and properly incurred expenses on the principal’s behalf, unless the agency agreement states otherwise. Furthermore, the agent has the right to take legal action against the principal if the principal breaches their obligations to the agent. An agency agreement can be terminated in several ways, including mutual agreement between the parties, revocation by either party (subject to contractual terms), a fundamental breach of contract by either party, the death or insanity of either party, illegality if the agreement becomes unlawful, or the expiration of a predetermined time period. The Employment Ordinance (Cap. 57) does not directly govern the principal-agent relationship in insurance, but principles of contract law and agency law, which are relevant to employment, do apply. The Insurance Ordinance (Cap. 41) sets out the regulatory framework for insurance activities in Hong Kong, including the conduct of insurance agents, but does not directly define the duties owed by a principal to an agent.

I. Correct. A policy franchise operates such that if the loss exceeds a certain threshold (the franchise), the entire loss is payable. This is different from an excess, where the insured always bears the initial portion of the loss.
II. Incorrect. A single article limit is designed to limit the insurer’s liability for any one item within a broader category of insured property, especially when the item’s value represents a significant portion of the total sum insured. It does not automatically mean the insurer will separately insure the item up to its value.
III. Correct. Reinstatement insurance ensures that no deductions are made for wear and tear or depreciation when settling a claim, providing a more comprehensive indemnity than a standard policy.
IV. Incorrect. In non-marine insurance, a valued policy agrees to pay the stated sum insured in the event of a total loss, regardless of the actual value at the time of loss. However, for partial losses, the actual amount of the loss is payable, not the agreed value.

Therefore, statements I and III are correct.

In the context of insurance classification, it’s crucial to understand the different approaches used for internal management, regulatory authorization, and academic study. Departmental classification, often seen in the UK and US styles, focuses on broad categories like Life, Marine, Fire, and Accident. Source of business classification categorizes business based on how it was obtained (e.g., agents, brokers, direct). Type of client classification distinguishes between personal/consumer insurance and business/commercial insurance. Academic classification, on the other hand, categorizes insurance based on the subject matter (person, property, liability) or function it performs. Understanding these classifications is essential for both internal operations and external interactions with clients and regulators. The Insurance Ordinance in Hong Kong grants authorization to transact business based on specific classes, even if insurers use different internal classifications.

The Prevention of Bribery Ordinance (POBO) aims to maintain a corruption-free environment. Let’s analyze each statement:

I. Correct. Section 9(1) of the POBO prohibits an agent from soliciting or accepting any advantage without the principal’s permission when conducting the principal’s business. This directly addresses the scenario described.

II. Correct. Section 9(2) of the POBO states that both offering and accepting an advantage constitute an offense. Therefore, the client offering the advantage is also committing an offense.

III. Incorrect. While Section 9(3) of the POBO addresses the use of false documents to deceive a principal, the scenario describes accepting an advantage to conceal pre-existing illness, which falls under Section 9(1) and 9(2), not 9(3).

Therefore, statements I and II are correct.

According to the Personal Data (Privacy) Ordinance, data subjects possess specific rights regarding their personal data. These rights include the ability to access their data and request corrections to ensure accuracy. This principle is fundamental to data protection. When outsourcing data processing, data users must ensure that data processors adhere to the data protection principles. This can be achieved through contractual means, specifying security measures, data handling procedures, and audit rights. Alternatively, ‘other means’ such as non-contractual oversight and auditing mechanisms can be employed. Good practices also include transparency with data subjects about data processing practices, ensuring contracts are enforceable in relevant jurisdictions, maintaining records of data transfers, and considering the use of anonymized data for system testing.

Statement I is correct. According to the guidelines for licensed insurance brokers, they must explain the principle of utmost good faith to the client, emphasizing that non-disclosure or incorrect information can invalidate the policy or lead to claim repudiation.

Statement II is correct. Brokers are required to inform clients about the types of material facts that should be disclosed to the insurer.

Statement III is correct. Brokers must ensure the client has the opportunity to review any declarations before signing or making them.

Statement IV is incorrect. While brokers must disclose material facts to the insurer, there is no requirement to disclose the referrer’s commission to the client before arranging the insurance policy. The focus is on disclosing information about the insurance policy itself and the broker’s role.

Therefore, statements I, II, 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 also exempts a proposed responsible officer of a licensed insurance broker company from specified education or professional qualifications if they were a Chief Executive registered with the CIB or PIBA at any time before 23 September 2019.
III: Incorrect. While relevant experience is expected, the IA generally expects a minimum of 5 years’ experience in the insurance industry, including at least 2 years of management experience, not 3 years.
IV: Incorrect. The IA assesses an individual’s competence, considering whether they have been dismissed or requested to resign from any position for misconduct, incompetence, negligence, or mismanagement. Mental health status is also considered, but not physical disabilities.

The question explores the fundamental concepts of risk as defined within the context of insurance principles, a core topic in the IIQE Paper 1 syllabus. It distinguishes between pure and speculative risks, and examines the nature of insurable risks.

Option (a) correctly identifies that a pure risk involves only the possibility of loss, with no chance of gain. This aligns with the definition of pure risk as a situation where the outcomes are either loss or no loss, which is a key concept for understanding insurable risks.

Option (b) is incorrect because a particular risk affects only individuals or small groups, not the entire economy.

Option (c) is incorrect because a speculative risk involves both the possibility of loss and the possibility of gain, making it generally uninsurable.

Option (d) is incorrect because a fundamental risk affects a large segment of the population or the entire economy, such as natural disasters or economic downturns.

Therefore, the correct answer is (a) pure risk.

Insurers have a responsibility to handle claims fairly and efficiently, as outlined in the IIQE Paper 1 syllabus. This includes issuing claim forms promptly and in understandable language, keeping claimants informed of the progress of their claim, providing reasonable explanations if a claim is denied, and making prompt payments on valid claims. Insurers must also ensure that third parties acting on their behalf, such as adjusters, act reasonably and are professionally qualified. The Insurance Complaints Bureau (ICB) provides an avenue for resolving disputes between insurers and policyholders. The ICB’s Insurance Claims Complaints Panel can make awards against insurers up to a certain limit, and its decisions are guided by policy terms, general principles of good insurance practice, applicable laws, and relevant codes and guidelines. The ICB also offers mediation services for non-claim related insurance disputes. Insurers must also have proper procedures in place to handle complaints against insurance agents and provide them with adequate support to perform their duties efficiently. Insurers cannot limit their liability for the actions of their insurance agents and must ensure that agents act fairly and honestly.

Statement I is correct because insurers are indeed expected to issue claim forms promptly and without charge, using language that is easy for policyholders to understand.

Statement II is correct because insurers are required to provide a reasonable explanation if a claim is not admitted, helping the policyholder understand the reasons for the denial.

Statement III is correct because insurers are expected to make payments promptly once a claim has been validated and approved.

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

Statement I is correct. The Insurance Complaints Bureau (ICB) handles complaints of a monetary nature, as stated in its terms of reference.
Statement II is incorrect. The ICB’s jurisdiction limit is HK$1,000,000, not HK$2,000,000.
Statement III is correct. The ICB handles complaints related to personal insurance policies, as per its terms of reference.
Statement IV is incorrect. The complaint must be filed with the ICB within 6 months of the insurer’s final decision, not 12 months.
Therefore, statements I and III are correct.