IIQE Paper 1 Principles and Practice of Insurance Examination Quiz 55

Question 1 of 30

1. Question

During a comprehensive review of a process that needs improvement, an insurance company, acting as a data user, outsources the processing of customer personal data to a third-party data processor. The data processor subsequently mishandles this data, leading to a privacy breach. According to the Personal Data (Privacy) Ordinance, who bears the primary responsibility to the affected data subject for this breach?

The insurance company (data user) as the principal for the data processor's actions.
The data processor, as they directly performed the infringing act.
The Office of the Privacy Commissioner for Personal Data (PCPD), as they oversee data protection.
The data subject, as they are responsible for safeguarding their own information.

Question 2 of 30

2. Question

During a comprehensive review of a process that needs improvement, an insurance company is found to be operating under a composite license, engaging in both general and long-term insurance activities. According to the Insurance Companies Ordinance (Cap. 41), what is the minimum paid-up capital required for such an entity to maintain its authorization?

HK$20 million
HK$10 million
HK$2 million
HK$12 million

Question 3 of 30

3. Question

During a comprehensive review of a process that needs improvement, an Insurance Authority (IA) investigator requests a Registered Person (RP) to provide documentation verifying their completion of Continuing Professional Development (CPD) hours for the previous year. The RP, who is registered to engage only in Restricted Scope Travel Business (RSTB), fails to respond to this request within the stipulated timeframe. What is the likely consequence for this RP’s registration status according to the relevant IA guidance?

The RP's registration will be revoked for a period determined by the IA, and their future registration applications will be contingent upon providing the requested proof of compliance.
The RP will be issued a warning and a short suspension of their registration, with a requirement to submit the CPD proof within an extended deadline.
The RP's registration will be immediately and permanently cancelled, with no possibility of re-application.
The RP will be fined a substantial amount and required to complete double the outstanding CPD hours before their registration can be reinstated.

Question 4 of 30

4. Question

During a comprehensive review of a process that needs improvement, a newly appointed insurance agent is eager to start soliciting business for their principal. They have submitted their registration application to the IARB and are awaiting the official confirmation. According to the relevant guidelines concerning the effective date of registration, when is it permissible for this individual to begin acting as an insurance agent on behalf of their principal?

From the date the registration application was submitted to the IARB.
Once the individual has received verbal confirmation from their principal that the application is being processed.
On the date specified by the IARB in the official Notice of Confirmation of Registration.
Immediately after completing the initial training course, regardless of the registration status.

Question 5 of 30

5. Question

During a comprehensive review of a process that needs improvement, a client expresses significant frustration regarding the lengthy and unclear procedure for updating their existing insurance policy details. The client’s feedback indicates a poor experience with the administrative handling of their request. Which primary department within an insurance company is most directly responsible for addressing and resolving such client service issues?

Customer Servicing
Marketing and Promotion
Insurance Sales
Claims Department

Question 6 of 30

6. Question

During a meeting with a client at a coffee shop, an insurance representative is reviewing a policy document that contains the client’s personal financial details. The representative must ensure that the information on the document is not inadvertently exposed to other patrons and that their discussion about the client’s sensitive information remains private. Which of the following principles is most critical for the representative to adhere to in this situation, as per industry best practices and relevant guidelines for agents working outside the workplace?

Maintaining the confidentiality and privacy of customer data
Ensuring the client feels comfortable and valued during the meeting
Complying with all aspects of the Personal Data (Privacy) Ordinance
Adhering strictly to the insurance institution's internal data handling policies

Question 7 of 30

7. Question

During a comprehensive review of a process that needs improvement, an authorized insurer operating solely as a captive insurer is found to have paid-up capital of HK$3 million. Based on the Insurance Companies Ordinance (Cap. 41), what is the minimum paid-up capital required for this type of insurer to operate in Hong Kong?

HK$2 million
HK$5 million
HK$10 million
HK$20 million

Question 8 of 30

8. Question

When dealing with a participating life insurance policy, which of the following represents the primary method by which a policyholder receives a share of the insurer’s profits?

Bonuses
Rebates
Commissions
Underwriting profits

Question 9 of 30

9. Question

When considering the foundational principles of agreements relevant to insurance intermediaries, what is the most precise definition of a contract?

A legally enforceable agreement
A written document detailing mutual promises
A social arrangement with clear intentions
An exchange of goods or services with a handshake

Question 10 of 30

10. Question

During a comprehensive review of a process that needs improvement, an insurer is found to have mishandled a personal insurance claim. The complainant, unsatisfied with the insurer’s internal resolution, refers the matter to the Insurance Claims Complaints Bureau (ICCB). The ICCB’s appointed Panel investigates and makes an award against the insurer. Under the relevant regulations, what recourse does the insurer have regarding this award?

The insurer has no right to appeal the award made by the Panel.
The insurer can appeal the award to the Insurance Authority within 14 days.
The insurer can appeal the award to the Insurance Agents Registration Board.
The insurer can appeal the award to a higher court if the award exceeds HK$500,000.

Question 11 of 30

11. Question

During a comprehensive review of a process that needs improvement, an insurance practitioner transitions to a new insurance institution. Before leaving their previous role, they make copies of existing customer policy details and contact information. The practitioner intends to use this data to market the new institution’s products to these former clients. Under the Personal Data (Privacy) Ordinance and related guidance, what is the primary concern with this action?

The practitioner is violating the principle of using data only for the purpose for which it was collected.
The practitioner is failing to ensure the accuracy of the data by not re-verifying it with the customers.
The practitioner is not obtaining explicit consent from the customers for the transfer of their data to a new entity.
The practitioner is not adequately securing the data during the copying process, potentially leading to breaches.

Question 12 of 30

12. Question

During a comprehensive review of a process that needs improvement, a financial advisor is examining historical life insurance policies. A client had a whole life policy on their spouse, which was taken out during their marriage. However, by the time of the spouse’s passing, the couple had divorced. According to the principles governing insurable interest in Hong Kong insurance law, the claim on this policy would likely be valid because:

Insurable interest is only a requirement at the inception of a life insurance policy.
The assignment of the policy to a new beneficiary would have been completed before the insured's death.
Insurable interest is not required for any type of insurance contract in Hong Kong.
The lack of insurable interest at the time of loss invalidates all life insurance policies.

Question 13 of 30

13. Question

During a comprehensive review of a process that needs improvement, it was discovered that a Principal failed to implement a required disciplinary action against a Registered Person. According to the relevant regulations governing insurance intermediaries in Hong Kong, what is a potential consequence for this Principal?

The Insurance Authority may impose an additional disciplinary or other action on the Principal.
The Registered Person's license will be automatically suspended by the Insurance Authority.
The Principal will be required to undergo mandatory retraining on disciplinary procedures.
The Insurance Authority will issue a formal warning to the Principal and no further action will be taken.

Question 14 of 30

14. Question

During a comprehensive review of a process that needs improvement, an insurance intermediary identifies a transaction involving a client with known links to a group previously designated as a terrorist organization. The intermediary suspects that this transaction might involve the provision of financial services to a terrorist associate. To mitigate potential legal repercussions under Hong Kong’s anti-terrorism financing regulations, what action should the intermediary prioritize to establish a statutory defence?

Filing a report with the Joint Financial Intelligence Unit (JFIU) in the prescribed manner detailing the suspicious transaction.
Immediately ceasing all business dealings with the client without any further reporting.
Seeking legal advice from external counsel before taking any action.
Disclosing the suspicion to the client to understand their intentions.

Question 15 of 30

15. Question

During a comprehensive review of a process that needs improvement, a compliance officer noted that the registration renewal for Technical Representatives was often processed very close to the expiry date, causing potential disruptions. Based on the regulatory framework for insurance intermediaries, what is the earliest timeframe within which a Technical Representative’s registration can be submitted for renewal to ensure continuous validity?

Within three months prior to the current registration's expiration date
Exactly one month before the current registration's expiration date
Anytime within the six months preceding the current registration's expiration date
No earlier than the day after the current registration's expiration date

Question 16 of 30

16. Question

When navigating the regulatory framework governing insurance intermediaries in Hong Kong, which of the following best characterizes the distinction between an ‘Insurance Agent’ and a ‘Responsible Officer’ or ‘Technical Representative’ as defined within the Code of Practice for the Administration of Insurance Agents?

A Responsible Officer or Technical Representative is a specific designation within the Code that is excluded from the broader definition of an Insurance Agent, which encompasses both individuals and agencies.
An Insurance Agent is exclusively an individual natural person, while a Responsible Officer or Technical Representative can be an entity such as a corporation.
The Code considers all individuals involved in advising on or arranging insurance contracts, regardless of their specific role, to be Insurance Agents.
A Responsible Officer or Technical Representative is a type of Insurance Agency, and the terms are used interchangeably in the Code.

Question 17 of 30

17. Question

During a comprehensive review of a process that needs improvement, a financial institution (FI) receives a notice from the relevant authorities, published in the Government Gazette under section 4 of the United Nations (Anti-Terrorism Measures) Ordinance (UNATMO). This notice designates a specific individual and their associated accounts for freezing. What is the immediate and primary obligation of the FI upon receiving such a notice?

Immediately cease all transactions and dealings with the designated individual's accounts and property, as per the UNATMO directive.
Report the suspicious transaction to the Joint Financial Intelligence Unit (JFIU) and await further instructions before taking any action on the account.
Contact the designated individual to seek clarification regarding the source of their funds and the nature of their transactions.
Review internal policies and procedures to ensure they adequately address asset freezing requirements before implementing any action.

Question 18 of 30

18. Question

During a comprehensive review of a process that needs improvement, an insurance company’s management team is analyzing how to better track the origin of their policies to understand customer acquisition channels. Which of the following practical classifications would be most relevant for this specific internal management objective?

Classification by source of business
Classification by type of client
Classification by departmental (class of business) approach
Classification by academic subject matter

Question 19 of 30

19. Question

During a comprehensive review of a process that needs improvement, an insurance company, acting as a data user, outsources the processing of customer personal data to a third-party data processor. The data processor subsequently mishandles this data, leading to a privacy breach that causes distress to a data subject. Under the Personal Data (Privacy) Ordinance, who is primarily accountable to the data subject for this infringement?

The insurance company (data user) is liable as the principal for the data processor's actions.
The data processor is directly liable to the data subject for the privacy breach.
The Office of the Privacy Commissioner for Personal Data (PCPD) is solely responsible for addressing the breach.
The data subject must first attempt to resolve the issue directly with the data processor before pursuing any other action.

Question 20 of 30

20. Question

During a comprehensive review of a process that needs improvement, an insurance policyholder discovers an error in their personal details recorded by the insurer. According to the Personal Data (Privacy) Ordinance, what is the policyholder’s primary recourse to rectify this situation?

Request a formal correction of the inaccurate information from the insurer.
File a complaint with the insurance industry's self-regulatory body.
Demand immediate deletion of all associated personal data.
Seek compensation for potential inconvenience caused by the inaccuracy.

Question 21 of 30

21. Question

When dealing with a complex system that shows occasional inconsistencies in the registration and conduct of insurance intermediaries, which body is primarily responsible for investigating complaints, managing registration processes, and ensuring adherence to regulatory codes, with the ultimate authority to report breaches to the Insurance Authority?

The Insurance Agents Registration Board (IARB)
The Hong Kong Federation of Insurers (HKFI)
The Insurance Authority (IA)
The Principal's Compliance Department

Question 22 of 30

22. Question

During a comprehensive review of a process that needs improvement, an authorized insurer in Hong Kong is found to be actively engaged in underwriting both general insurance policies and long-term insurance contracts. Based on the Insurance Companies Ordinance, what is the minimum paid-up capital required for this insurer to operate legally?

HK$20 million
HK$10 million
HK$2 million
HK$5 million

Question 23 of 30

23. Question

During a comprehensive review of a process that needs improvement, an insurance agent is found to be actively involved in selling and advising on Mandatory Provident Fund (MPF) schemes in addition to their insurance business. Under the relevant Hong Kong regulations, what additional registration is mandatory for this agent to legally conduct both activities?

Registration as an MPF intermediary with the MPFA
Confirmation of appointment by the IARB for MPF advisory services
Licensing as a travel agent under the Travel Agents Ordinance
Registration with the HKFI as a specialist MPF advisor

Question 24 of 30

24. Question

During a comprehensive review of a process that needs improvement, a compliance officer noted that the registration renewal for Technical Representatives was often processed very close to the expiry date, creating potential risks. Based on the regulatory framework for insurance intermediaries, what is the earliest timeframe within which a Technical Representative’s registration can be submitted for renewal to ensure continued authorization?

No earlier than three months before the current registration expires
Within one month of the current registration's expiry date
Exactly six months prior to the current registration's expiration
Anytime within the year preceding the current registration's expiry

Question 25 of 30

25. Question

During a comprehensive review of a process that needs improvement, an authorized insurer in Hong Kong is found to be conducting both General and Long Term insurance business. Based on the Insurance Companies Ordinance, what is the minimum paid-up capital that this insurer must maintain to comply with regulatory requirements?

HK$20 million
HK$10 million
HK$2 million
HK$5 million

Question 26 of 30

26. Question

During a comprehensive review of a process that needs improvement, an insurance broker authorized by the Insurance Authority (IA) is found to have not submitted their annual audited financial statements within the stipulated timeframe. According to the Insurance Ordinance and related regulations, what is the primary obligation of such an authorized insurance broker concerning their financial reporting to the IA?

Submit annual audited financial statements that present a true and fair view of the business's financial standing and profitability, along with an auditor's report confirming compliance with minimum requirements, within six months of the financial year-end.
Provide a detailed explanation for the delay in submitting the annual audited financial statements and commit to submitting them within the next three months.
Submit unaudited financial statements along with a provisional auditor's report, indicating that the audited statements will follow at a later date.
Request an extension from the IA for submitting the audited financial statements, citing operational challenges faced during the financial year.

Question 27 of 30

27. Question

When assessing the financial stability of an authorized insurer, which of the following regulatory requirements, as stipulated by the Insurance Ordinance, is considered a crucial element that the Insurance Authority (IA) scrutinizes for both its volume and the reliability of recovery?

The adequacy of its reinsurance arrangements
The specific valuation methods used for its general business liabilities
The maintenance of separate accounts for different long-term business classes
The submission of an audited Statement of Assets and Liabilities for its Hong Kong business

Question 28 of 30

28. Question

When dealing with a complex system that shows occasional vulnerabilities to illicit financial flows, what primary obligation does the Anti-Money Laundering and Counter-Terrorist Financing (Financial Institutions) Ordinance (AMLO) place upon financial institutions to proactively address these risks?

To establish and maintain comprehensive safeguards to prevent violations of specific provisions and to minimize money laundering and terrorist financing risks.
To conduct thorough customer due diligence (CDD) on all new and existing clients to identify suspicious activities.
To maintain detailed and accurate records of all transactions for a minimum of seven years.
To report any suspicious transactions exceeding a certain threshold to the Joint Financial Intelligence Unit (JFIU) immediately.

Question 29 of 30

29. Question

During a comprehensive review of a process that needs improvement, an insurance broker is found to have incomplete transaction logs and financial summaries. According to the Insurance Companies Ordinance, what is the primary purpose of the accounting and other records that an insurance broker is obligated to maintain?

To sufficiently explain transactions, reflect the financial position, enable a true and fair view of financial statements, and be auditable.
To provide a detailed history of all client interactions and communication logs for marketing purposes.
To ensure all staff are aware of the company's profit margins and operational costs.
To serve as a reference for potential investors interested in the broker's business performance.

Question 30 of 30

30. Question

During a comprehensive review of a process that needs improvement, an authorized insurer is examining its internal controls related to member compliance. According to the Insurance Ordinance and related regulations, what are the key responsibilities of the insurer concerning the financial reporting of its members?

To verify that each member has submitted their financial statements and auditor’s reports as per membership rules, and to review these reports for any adverse auditor statements or qualifications.
To ensure all members have their financial statements audited by an approved Hong Kong-based auditor, regardless of their membership rules.
To collect financial statements from members only if they are experiencing financial difficulties, and to ignore auditor’s reports unless specifically requested.
To maintain a centralized database of all member financial statements and auditor’s reports, but without an obligation to review them for compliance or adverse findings.