IIQE Paper 1 Principles and Practice of Insurance Examination Quiz 52

Question 1 of 30

1. Question

During a comprehensive review of a process that needs improvement, an insurance broker is advising a client on a complex property insurance policy. The broker has a strong existing relationship with a particular insurer that offers competitive rates. However, to ensure the client receives the most appropriate coverage, the broker also researches and presents options from several other reputable insurers. Which of the following actions best demonstrates the broker’s adherence to the principle of placing the client’s interests above all other considerations?

Presenting a range of suitable insurance options from multiple insurers, even if some offer less favorable terms than the broker's preferred insurer, to ensure the client has a comprehensive selection.
Recommending only the insurer with whom the broker has the most favorable commission structure, as this benefits the broker's business.
Limiting the client's choices to a select few insurers to streamline the decision-making process and reduce administrative burden.
Focusing solely on the insurer that provides the lowest premium, without thoroughly assessing the policy's coverage and exclusions.

Question 2 of 30

2. Question

During a period of significant change where established methods conflict with new operational demands, an insurance agent, entrusted with managing a client’s policy renewals, fails to process a renewal payment on time due to an administrative oversight. The client’s policy subsequently lapses, and a claim is denied. The agent had sufficient funds from the client to cover the premium. Under the principles of agency law relevant to the IIQE syllabus, what is the most likely consequence for the agent?

The agent may be held liable to the principal for the loss incurred due to the lapse in coverage, as this indicates a breach of the duty of due care and skill.
The agent is protected from liability as the lapse was an unintentional administrative error, which is not considered a breach of duty.
The principal is solely responsible for the loss, as the ultimate decision to renew the policy rests with them.
The agent's actions would be considered an act of necessity, absolving them of any responsibility for the lapse.

Question 3 of 30

3. Question

During a comprehensive review of a process that needs improvement, an insurance broker is advising a client on a complex property insurance policy. The broker has a strong, long-standing relationship with a particular insurer that offers competitive rates. However, to ensure the client receives the best possible coverage and terms, the broker must consider a wider market. Which of the following actions best demonstrates the broker’s adherence to placing the client’s interests first, as mandated by professional conduct guidelines?

Presenting a curated selection of policies from various insurers, including the broker's preferred insurer, while clearly outlining the pros and cons of each.
Recommending only the policies from the insurer with whom the broker has the most favorable business relationship, assuming their products are generally competitive.
Suggesting that the client directly contact several insurers to compare options independently, thereby absolving the broker of the responsibility to present a comprehensive market overview.
Focusing the client's attention primarily on the insurer with whom the broker has a significant volume of business, highlighting their perceived reliability.

Question 4 of 30

4. Question

During a comprehensive review of a process that needs improvement, a registered technical representative for a travel insurance agency discovers they have not met their annual Continuing Professional Development (CPD) obligations. According to the regulatory framework, what is the most likely initial consequence for this individual’s registration status if they are unable to provide proof of compliance when requested by the relevant authority?

Registration revocation for a period determined by the authority, with future registration contingent on providing proof of compliance.
A mandatory 3-month suspension of registration, requiring completion of all outstanding CPD hours before re-registration.
An immediate and permanent cancellation of their registration, with no possibility of future re-application.
A warning and a grace period of six months to complete the required CPD hours without any impact on their current registration.

Question 5 of 30

5. Question

During a comprehensive review of a process that needs improvement, a client contacts the insurance company to inquire about specific clauses within their existing motor insurance policy and also requests a replacement copy of their insurance certificate. Which department is primarily responsible for addressing these client needs according to standard operational procedures?

Customer Servicing Department
Marketing and Promotion Department
Insurance Sales Department
Claims Department

Question 6 of 30

6. Question

During a comprehensive review of a process that needs improvement, an insurance agent is found to be actively involved in advising clients 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 Insurance Authority Registration Board (IARB) for MPF activities
Licensing as a travel agent under the Travel Agents Ordinance
Registration with the Hong Kong Federation of Insurers (HKFI) for dual-licensing

Question 7 of 30

7. Question

During a comprehensive review of a process that needs improvement, an insurance policy that has reached its expiry date is being considered. The insurer has offered to continue coverage for an additional period under specific terms. In the context of insurance regulations and practices, how is this continuation of coverage legally constituted?

As a new contract being established.
As a substitution of the original policy terms.
As a transfer of the existing risk to a new entity.
As an allocation of funds to cover potential future claims.

Question 8 of 30

8. Question

During a comprehensive review of a process that needs improvement, a financial institution (FI) discovered that one of its employees had facilitated a financial transaction for an individual later identified as a terrorist associate. This facilitation occurred without the necessary authorization. Under the relevant Hong Kong legislation aimed at combating terrorist financing, what is the maximum custodial penalty an individual could face for making financial services available to a terrorist associate without a licence?

A maximum of 14 years imprisonment
A maximum of 7 years imprisonment
A maximum of 10 years imprisonment
A maximum of 5 years imprisonment

Question 9 of 30

9. Question

When considering the foundational principles of contract law relevant to insurance intermediaries, which of the following best encapsulates the essence of a contract?

A legally enforceable agreement involving mutual promises.
A written document detailing terms of service between parties.
A social arrangement with an understanding of mutual obligations.
An informal understanding that can be altered at any time.

Question 10 of 30

10. Question

During a comprehensive review of a process that needs improvement, an insurer identifies that new policyholders are not consistently informed about the company’s internal complaint resolution mechanisms. According to the HKFI’s ‘Guidelines on Complaint Handling,’ what is the most critical action the insurer must take to ensure compliance with accessibility principles?

Proactively inform all new customers about the availability of complaint handling procedures.
Limit the distribution of complaint handling procedures to only those who explicitly request them.
Ensure that complaint handling procedures are only accessible at the insurer's head office.
Require all complaints to be submitted in writing, thereby documenting the process.

Question 11 of 30

11. Question

During a comprehensive review of a process that needs improvement, an applicant for registration as an insurance intermediary is found to have passed the relevant Insurance Intermediaries Qualifying Examination (IIQE) papers two years ago but has not engaged in any insurance-related work since then. Furthermore, records indicate they have not participated in any Continuing Professional Development (CPD) activities as stipulated by the Insurance Authority (IA). Under the IA’s Code of Conduct, which of the following is the most likely reason for this applicant to be considered not fit and proper for registration?

Non-compliance with Continuing Professional Development (CPD) requirements.
Failure to maintain continuous engagement in insurance-related work for two consecutive years after passing IIQE papers.
Not being a Hong Kong Permanent Resident.
Having completed education to a level below Form 5.

Question 12 of 30

12. Question

During a comprehensive review of a process that needs improvement, a financial institution (FI) identifies a client whose recent transactions, while not yet definitively linked to a specific terrorist group, exhibit patterns strongly indicative of funding illicit activities that could support terrorism. The FI’s compliance department is considering whether to continue providing services to this client while investigating further, or to immediately cease services and report the suspicion. Under the relevant Hong Kong legislation aimed at combating terrorist financing, what is the most appropriate course of action for the FI?

Immediately cease providing any financial services to the client and report the suspicion to the Joint Financial Intelligence Unit (JFIU).
Continue providing financial services to the client but apply enhanced due diligence and monitor all transactions closely.
Seek a license from the Secretary for Security to continue providing services while the investigation is ongoing.
Inform the client of the suspicion and request them to provide documentation to prove the legitimacy of their funds before continuing services.

Question 13 of 30

13. 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 made copies of policyholder details from their former employer’s records. They intend to use this information to market the new institution’s products. Which data protection principle is most directly contravened by this action?

Using personal data for a purpose that is incompatible with the original purpose for which it was collected.
Collecting personal data by means that are prohibited by law or are unfair.
Ensuring that personal data is accurate and not kept for longer than necessary.
Implementing security safeguards to protect personal data against unauthorized access.

Question 14 of 30

14. Question

During a comprehensive review of a process that needs improvement, an insurance company discovered that one of its agents, who was explicitly instructed not to underwrite high-risk marine cargo policies, had consistently accepted such risks from a particular client. The company’s internal records showed that for each of these unauthorized acceptances, the company subsequently issued the relevant policies to the client. This pattern of behaviour has been ongoing for several months. Based on these facts, what legal principle would most likely bind the insurance company to a new, similar policy accepted by the agent from the same client, despite the agent’s explicit prohibition?

Apparent authority
Actual authority
Ratification
Ostensible authority

Question 15 of 30

15. 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 16 of 30

16. Question

In a scenario where the Insurance Authority seeks to ensure the professional conduct and standards of insurance intermediaries, which of the following entities, as recognized under Section 70 of the Insurance Ordinance, would be instrumental in providing a framework for the self-regulation and ethical practice of insurance brokers in Hong Kong?

An association of insurance brokers officially recognized by the Insurance Authority.
An individual insurance broker holding a valid license to operate.
The body responsible for issuing the Code of Conduct for Insurers.
A financial institution managing client accounts for insurance brokers.

Question 17 of 30

17. Question

An individual, already holding an insurance agent license, also possesses a license as a travel agent. This individual intends to offer insurance products specifically related to travel. To lawfully conduct this restricted scope travel insurance business, which of the following is a mandatory requirement as per the relevant regulations governing insurance intermediaries in Hong Kong?

Must be licensed as a travel agent under the Travel Agents Ordinance.
Must have their appointment confirmed by the IARB and be registered with them.
Must ensure their agency agreement adheres to the minimum requirements outlined in Part F of the Code.
Must be deemed to meet the 'fit and proper' criteria as defined by the Code.

Question 18 of 30

18. Question

During a comprehensive review of a process that needs improvement, an insurance intermediary regulator is examining the functions of the body responsible for overseeing the registration and conduct of insurance agents. Which of the following activities would be considered a core responsibility of this regulatory body, as outlined by the relevant code of conduct?

Investigating complaints against registered insurance agents and initiating disciplinary actions where necessary.
Providing direct financial advice to policyholders on behalf of insurance companies.
Setting premium rates for various insurance products across the market.
Developing marketing campaigns to promote the insurance industry in Hong Kong.

Question 19 of 30

19. Question

During a comprehensive review of a process that needs improvement, an insurance company discovers that a data processor, engaged to handle customer policy renewals, has inadvertently disclosed sensitive personal information of several policyholders. According to the Personal Data (Privacy) Ordinance (PDPO) in Hong Kong, who bears the primary responsibility for this breach of data privacy?

The insurance company (the data user) is primarily responsible as the principal for the actions of its appointed data processor.
The data processor is solely liable for the breach, as they were directly responsible for the processing activities.
Both the insurance company and the data processor share equal liability for the data breach.
The data subject is responsible for not taking adequate measures to protect their own personal data.

Question 20 of 30

20. Question

During a comprehensive review of a process that needs improvement, a proposer for commercial fire insurance failed to mention that their premises were equipped with an automatic sprinkler system. This system, if disclosed, would have resulted in a lower premium. According to the principles governing insurance contracts in Hong Kong, specifically concerning the duty of disclosure, what is the implication of this omission?

The omission does not breach the duty of utmost good faith as it pertains to a fact that diminishes the risk.
This omission constitutes a breach of utmost good faith because it relates to a factor influencing premium calculation.
The proposer has committed a breach of utmost good faith by not proactively informing the insurer of all protective measures.
The insurer can void the policy due to the non-disclosure of a fact that would have affected the premium, regardless of its nature.

Question 21 of 30

21. Question

During a voyage, a vessel carrying four distinct cargo shipments, each insured under separate marine policies for specific perils (collision, fire, explosion, and entry of water, respectively), experiences a sequence of events initiated by the master’s negligence. This negligence causes a collision, which ignites a fire. The fire subsequently leads to an explosion, resulting in the vessel springing leaks. All cargo is ultimately damaged by seawater entering through these leaks. Considering the principle of proximate cause, which of the following statements accurately reflects the recoverability of the cargo damage under the respective marine policies?

The cargo damaged by seawater is recoverable under the policy covering entry of water, as it is the direct consequence of a chain of events initiated by negligence, even though negligence itself is an uninsured peril.
None of the cargo damage is recoverable because the initial cause, the master's negligence, is an uninsured peril, thus invalidating all subsequent claims.
Only the cargo damaged by fire is recoverable, as fire is the first insured peril in the sequence, and subsequent events do not extend coverage.
The cargo damaged by seawater is only recoverable if the policy specifically excludes negligence as a contributing factor to water entry.

Question 22 of 30

22. Question

During a comprehensive review of a process that needs improvement, an Insurance Intermediary (Registered Person) is contacted by the Insurance Authority (IA) to submit evidence of their adherence to Continuing Professional Development (CPD) mandates. The intermediary, despite multiple reminders, does not furnish the requested documentation. What is the likely regulatory consequence for this failure to cooperate with the IA’s request for proof of CPD compliance?

The intermediary's registration will be suspended for a period determined by the IA, and future registration applications will be contingent upon providing the outstanding proof of compliance.
The intermediary will receive a formal warning and be required to complete double the outstanding CPD hours within the next renewal cycle.
The intermediary's registration will be immediately and permanently revoked without any possibility of re-application.
The intermediary will be fined a nominal amount and given an extension to submit the CPD proof, with no impact on their current registration status.

Question 23 of 30

23. Question

When an insurance company lacks a specialized investment department, which core accounting responsibility becomes paramount for safeguarding the insurer’s financial health and ensuring its capacity to meet future obligations?

The meticulous management and strategic allocation of the company's financial assets.
The diligent tracking and reconciliation of all incoming premium payments.
The accurate and timely recording of all financial transactions and policy details.
The efficient processing and disbursement of all outgoing claims and operational expenses.

Question 24 of 30

24. Question

During a comprehensive review of a process that needs improvement, an insurance intermediary is assessing a motor vehicle claim. The insured’s vehicle, valued at HK$500,000, was involved in an accident resulting in damage estimated at HK$150,000. The policy has no excess or franchise. The damaged vehicle, however, has a residual market value of HK$30,000. If the insurer decides to take ownership of the damaged vehicle to manage its disposal, what is the maximum amount the insurer would be liable to pay the insured for the loss?

HK$150,000
HK$120,000
HK$500,000
HK$30,000

Question 25 of 30

25. 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 26 of 30

26. Question

When reviewing a claim dispute, the Insurance Complaints Committee (ICCB) Panel is empowered to consider factors beyond the explicit wording of the insurance policy. Which of the following best describes the primary basis for the Panel’s ability to potentially override strict policy terms in favour of a complainant?

The Panel can disregard policy terms if they lead to an outcome deemed unfair or unreasonable to the complainant, as stipulated in the ICCB's Articles of Association.
The Panel must strictly adhere to all policy terms, as the Insurance Ordinance mandates that policy contracts are the ultimate governing documents.
The Panel's discretion is limited to procedural errors by the insurer, and it cannot alter the substantive interpretation of policy coverage.
The Panel's decisions are solely based on the financial amount of the claim, with no provision to review the fairness of policy application.

Question 27 of 30

27. Question

During a voyage, a vessel carrying insured cargo experiences a series of unfortunate events. The master’s negligence, an uninsured peril in the relevant marine cargo policies, leads to a collision with another vessel. This collision ignites a fire, which then triggers an explosion. The explosion causes the vessel to sustain multiple leaks, and seawater enters, damaging all the cargo. If the policies in question cover perils such as fire but exclude negligence and entry of water, how would the damage be assessed under the policy covering fire, considering the chain of events?

The damage is recoverable under the fire policy because the fire, an insured peril, is considered a proximate cause in the chain of events leading to the loss, despite being initiated by negligence.
The damage is irrecoverable because the initial cause, the master's negligence, is an uninsured peril and breaks the chain of causation.
The damage is only partially recoverable, with the insurer liable only for the portion directly attributable to the fire before the explosion occurred.
The damage is irrecoverable because the ultimate cause of the damage, the entry of seawater, is an uninsured peril and the fire policy does not cover water damage.

Question 28 of 30

28. Question

During a comprehensive review of a policy that excludes losses ‘directly or indirectly’ caused by civil unrest, an insured’s business premises were vandalized by looters during a protest. While the protest itself was a consequence of civil unrest, the direct cause of the damage was the looting. Under the specified exclusion wording, how would a court likely interpret the insurer’s liability for the damage?

The insurer would be liable as the direct cause of damage was looting, not civil unrest.
The insurer would not be liable because the looting was an indirect consequence of the civil unrest, triggering the exclusion.
The insurer would be liable only if the civil unrest was the proximate cause of the looting.
The insurer would be liable because the policy wording only excludes losses directly caused by civil unrest.

Question 29 of 30

29. Question

During a comprehensive review of a process that needs improvement, an insurance practitioner is examining the statutory classification of various insurance products offered in Hong Kong. They encounter a policy designed to provide a financial benefit to the policyholder upon the successful birth of their child. According to the Insurance Ordinance, which primary category and specific class would this type of policy most accurately be placed under?

Long Term Business, Class B: Marriage and birth
General Business, Class 2: Sickness
Long Term Business, Class A: Life and annuity
General Business, Class 1: Accident

Question 30 of 30

30. Question

During a comprehensive review of a policy that excludes losses ‘directly or indirectly’ caused by acts of terrorism, a scenario arises where a building’s structural integrity is compromised due to a minor, unrelated fire. However, this structural weakness, exacerbated by subsequent severe weather, ultimately leads to a partial collapse. Investigations reveal that the initial fire was indirectly linked to a security lapse that occurred during a period of heightened national security alerts, which themselves were a consequence of a prior terrorist incident. Under the ‘directly or indirectly’ exclusion, how would the insurer likely interpret the cause of the building’s collapse in relation to the terrorism exclusion?

The insurer would likely deny the claim, as the initial security lapse, indirectly linked to terrorism, set in motion a chain of events leading to the loss.
The insurer would likely cover the claim, as the proximate cause of the collapse was the severe weather, not the act of terrorism.
The insurer would likely cover the claim, as the initial fire was unrelated to terrorism and the subsequent events were natural occurrences.
The insurer would likely only cover the claim if the initial fire was proven to be a direct result of a terrorist act.