Paper 2 General Insurance Quiz 17

The question tests the understanding of exclusions in pleasure craft insurance, specifically concerning the ship’s boat. According to the provided text, a ship’s boat is excluded from coverage if it is not permanently marked with the parent boat’s name. This implies that if the ship’s boat is properly marked, it would be covered under the policy. Therefore, the scenario where the ship’s boat is properly marked would lead to a claim being accepted for damage to it.

The scenario describes a situation where an insured person, a businessman, sustained a back injury and underwent surgery. Initially, the insurer paid Temporary Total Disability (TTD) benefits. However, based on a medical examiner’s report indicating improved trunk movement, the insurer reclassified the benefit to Temporary Partial Disability (TPD), arguing the insured could perform some duties. The Complaints Panel, weighing the opinions of the insured’s attending doctors against the insurer’s consultant, ultimately sided with the attending doctors, ruling that the insured should continue receiving TTD benefits. This decision highlights the importance of the attending physician’s assessment in determining the extent of disability, especially when there are conflicting medical opinions. The key factor is whether the insured is unable to perform *any* of their usual occupation duties for TTD, or if they can perform *some* duties, which would qualify for TPD. The panel’s inclination to believe the attending doctors suggests their direct and ongoing observation of the patient’s condition was given more weight than the insurer’s consultant’s assessment, which might have been based on a single examination or a specific aspect of recovery.

This question tests the understanding of the distinction between ‘Specified Perils’ and ‘All Risks’ cover in property insurance, as outlined in the IIQE syllabus. ‘Specified Perils’ cover only losses caused by events explicitly listed in the policy, requiring the claimant to prove the cause of loss. ‘All Risks’ cover, conversely, covers all accidental losses unless specifically excluded, shifting the burden of proof to the insurer to demonstrate an exclusion applies. The scenario describes a situation where a loss occurred, but the exact cause is unknown. Under ‘Specified Perils’ cover, the claimant would need to identify a listed peril that caused the damage. However, under ‘All Risks’ cover, the claimant only needs to prove that an accidental loss occurred, and the insurer would then need to prove an exclusion applies. Therefore, the ‘All Risks’ policy is more advantageous in this situation as it simplifies the claims process for the insured when the cause of loss is not immediately apparent.

This question tests the understanding of exclusions in Directors’ and Officers’ (D&O) liability insurance, specifically concerning actions taken by the insured. The scenario describes a director engaging in fraudulent activity to gain personal profit. D&O policies typically exclude coverage for claims arising from dishonesty or fraud by the insured director. While the policy might cover defense costs for allegations of dishonesty, it will not indemnify for losses directly resulting from proven fraudulent acts. Option B is incorrect because while pollution is excluded, it’s not the primary exclusion for the described action. Option C is incorrect as contractual liability exclusions are separate from personal gain through fraud. Option D is incorrect because while a retroactive date is relevant for claims-made policies, it doesn’t override the exclusion for dishonest acts.

The Motor Vehicles Insurance (Third Party Risks) Ordinance mandates compulsory third-party liability insurance for motor vehicles in Hong Kong. This ordinance ensures that victims of motor accidents have a recourse for compensation, even if the at-fault driver is uninsured or unable to pay. The Motor Insurers’ Bureau of Hong Kong (MIB) plays a crucial role in fulfilling the intentions of this compulsory insurance by providing a safety net where such insurance is not available or effective, funded by a levy on motor insurance premiums. Therefore, understanding this ordinance is fundamental to motor insurance practices in Hong Kong.

The scenario highlights the importance of the insured’s duty to notify the insurer of a potential claim promptly. While the insured believed 20 days was reasonable, the insurer’s ability to investigate was prejudiced by the repair being completed before notification. The Complaints Panel acknowledged this prejudice but ultimately ruled in favour of the insured due to the simplicity of the circumstances and the availability of alternative verification methods (repair slip, inspection of parts). This suggests that while timely notification is crucial, the degree of prejudice to the insurer and the availability of other means to verify the claim can influence the outcome, especially in cases where the insured acts in good faith and the claim is genuine. The key takeaway is that a breach of the notification condition doesn’t automatically void a claim if the insurer’s ability to assess the claim’s validity and quantum is not significantly impaired, or if other means of verification exist.

The scenario describes an individual injured while ice-skating. The insurer denied the claim based on a policy exclusion for ‘winter-sports’. The Complaints Panel, in interpreting this exclusion, determined that ‘winter-sports’ generally encompass activities performed on snow or ice, regardless of the season or whether the activity is indoors or outdoors. Therefore, ice-skating, even indoors, falls under this broad interpretation of winter sports. The key takeaway is that the definition of excluded activities in insurance policies can be interpreted broadly by regulatory bodies to include activities that share common characteristics with the excluded category, even if not explicitly listed.

A performance bond is a type of surety bond, not an insurance policy. Its primary function is to guarantee the fulfillment of contractual obligations, specifically the completion of construction work within a stipulated timeframe. Unlike insurance, which typically covers unforeseen events, a performance bond is a financial guarantee that the contractor will perform as agreed, or the surety will cover the cost of completion. The question tests the understanding of the fundamental nature and purpose of a performance bond in contrast to an insurance policy.

A performance bond is a type of surety bond, not an insurance policy. Its primary function is to guarantee the fulfillment of contractual obligations, specifically the completion of construction work within a stipulated timeframe. Unlike insurance, which typically covers unforeseen events, a performance bond is a financial guarantee that the contractor will perform as agreed. If the contractor defaults, the bond ensures that the project owner can recover costs or find an alternative to complete the work. The other options describe different types of insurance or financial instruments: Personal Accident and Sickness Insurance covers injury and illness, Professional Indemnity Insurance covers negligence in professional services, and a Provisional Premium is an initial payment subject to adjustment.

The question tests the understanding of how premiums are determined in Personal Accident (PA) insurance, specifically referencing the provided text. The text explicitly states that while individual features like age might have underwriting consequences, the standard premium calculation is primarily based on the insured’s occupation, which is classified according to accident risk. Other factors like gender are mentioned as not affecting the premium if other conditions are equal. Therefore, occupation is the primary basis for premium calculation in this context.

The Code of Conduct for Insurers, established by the Hong Kong Federation of Insurers (HKFI), specifically addresses the standards expected in various aspects of the insurance business. Among these are the fair, efficient, and prompt handling of claims, as well as the criteria used when a claim is denied. While other regulations touch upon claims, the Code of Conduct provides detailed guidance on the industry’s best practices in this area, directly impacting customer experience and trust. The Insurance Companies Ordinance (ICO) focuses more on the financial stability and authorization of insurers, and while it mandates adequate reinsurance, it does not delve into the specifics of claims handling procedures or denial criteria as directly as the Code of Conduct.

The question tests the understanding of which vessels are subject to registration in Hong Kong under the relevant regulations. Option (a) correctly identifies vessels employed in sea fishing that regularly operate within Hong Kong waters or use them as a base. This aligns with the principle of regulating maritime activities within a jurisdiction. Option (b) is incorrect because vessels registered outside Hong Kong and trading to or from Hong Kong are generally covered by international conventions and their home country’s registration, unless specific local laws dictate otherwise for certain types of trade. Option (c) is incorrect as pleasure craft used in Hong Kong waters are typically subject to specific licensing and registration requirements, but the phrasing in (a) is more directly related to commercial or regular operational use. Option (d) is incorrect because while vessels from Mainland China or Macau trading to Hong Kong might have specific arrangements, the scenario in (a) is a broader category of vessels regularly employed in fishing within Hong Kong’s operational domain.

The question tests the understanding of how premiums are determined in Personal Accident (PA) insurance, specifically referencing the provided text. The text explicitly states that while individual features like age might have underwriting consequences, the standard premium calculation is primarily based on the insured’s occupation, which is classified according to accident risk. Other factors like gender are mentioned as having no impact on premiums, all else being equal. Therefore, occupation is the primary determinant for premium rates in this context.

Fidelity Guarantee Insurance indemnifies employers against financial losses resulting from dishonest acts by their employees. The question describes a scenario where an employee’s actions lead to financial loss due to theft. This directly aligns with the core purpose of Fidelity Guarantee Insurance, which covers such fraudulent activities. The other options are incorrect because Money Insurance typically covers loss of money due to external causes like robbery or fire, not internal employee theft. Public Liability Insurance covers an organization’s legal liability for injury or property damage to third parties. Burglary Insurance specifically covers loss of property due to forced entry and exit.

This question tests the understanding of exclusions in engineering insurance, specifically Boiler Explosion Insurance. The provided text states that risks normally insurable by other policies, such as fire and extra perils, are excluded from Boiler Explosion Insurance. This is to prevent duplication of coverage and ensure that each policy covers distinct risks. Therefore, a fire that occurs during a boiler explosion would typically be covered by a separate fire insurance policy, not the boiler explosion policy.

This question tests the understanding of the distinction between ‘Specified Perils’ and ‘All Risks’ cover in property insurance. ‘Specified Perils’ cover only losses caused by events explicitly listed in the policy, meaning the claimant must prove the loss was due to one of these named perils. ‘All Risks’ cover, conversely, covers all accidental losses unless specifically excluded, shifting the burden of proof to the insurer to demonstrate an exclusion applies. The scenario describes a situation where a loss occurred, and the claimant needs to demonstrate the cause was a specific event mentioned in the policy, which aligns with the definition of ‘Specified Perils’ cover.

The question tests the understanding of the core components typically found in a company’s published declaration of customer service standards, as outlined in the provided text. These declarations serve as a benchmark for declared intentions and a measure of performance. The text explicitly lists commitments to quality and service, dedication to professional standards, efficiency and high business ethics, fair and prompt claims handling, and specific information on business conduct. Option (a) accurately reflects these key elements, encompassing the insurer’s promises and obligations towards policyholders and intermediaries, which are central to building trust and ensuring transparency in the insurance industry.

A combined liability policy is designed to consolidate various liability coverages into a single document for convenience and potential premium savings. While it typically includes Public Liability, Products Liability, and Employees’ Compensation Liability, clients may also opt for additional coverages like Directors’ and Officers’ Liability or Professional Liability. The key characteristic is the integration of these distinct liability risks under one policy document. Option B describes a combined ‘Umbrella’ type cover, which is broader and can encompass property, pecuniary, and liability risks, often individually designed and not necessarily limited to the core liability types. Option C refers to property insurance, which covers physical assets, and pecuniary insurance, which covers financial interests, distinct from liability coverage. Option D describes a traditional fire policy, which is a form of property insurance and does not encompass liability risks.

A commercial motor policy, particularly one covering vehicles used for specialized tasks like excavation, often contains specific exclusions. The ‘tool of trade’ clause is a common exclusion that removes coverage when the vehicle is being used for its specialized function that might expose it to greater risks than standard road use. For instance, using an excavator to dig holes would fall under this exclusion, as it’s using the vehicle as a tool for its primary operational purpose, not just as a means of transport. The other options are less relevant: a ‘business use clause’ typically relates to the general purpose of the vehicle’s use (e.g., delivery vs. personal), a ‘working operations clause’ is too broad and less specific than ‘tool of trade’ for this context, and a ‘professional liability clause’ relates to errors in professional services, not the operation of a vehicle.

The ‘Schedule’ section of a scheduled policy form is specifically designed to contain all information pertinent to the individual risk being insured. This includes details such as the policy number, the insured’s particulars, coverage limits, effective dates, a description of the insured subject matter, the premium paid, and any special terms or endorsements that modify the standard wording. The Recital Clause introduces the contract and references the proposal form, while the Operative Clause outlines the circumstances under which coverage is active. General Exceptions apply to the entire policy, not just specific sections. Therefore, identifying the policy number falls under the purview of the Schedule.

In the context of insurance contracts, a ‘representation’ is a statement of fact made by the proposer before the contract is concluded. The principle of utmost good faith (uberrimae fidei) requires that such representations, particularly those concerning material facts, must be substantially true. If a representation is found to be untrue, and it relates to a material fact that influences the insurer’s decision to accept the risk or the terms offered, the insurer may have grounds to void the contract. The requirement is for substantial truth, meaning minor inaccuracies that do not affect the risk assessment are generally acceptable, but significant falsehoods can invalidate the policy. Options (b), (c), and (d) present absolute or overly strict requirements that are not aligned with the legal standard for representations in insurance.

The scenario describes a shop owner losing cash from her bag after closing her shop. The money insurance policy explicitly states that cover is for losses occurring during normal business hours while being conveyed by a messenger. Since the loss happened outside of business hours, it falls outside the defined scope of cover for this specific policy, leading to the rejection of the claim. The policy’s wording is crucial here, limiting coverage to a specific timeframe to manage risk and premium.

The question tests the understanding of the core components typically found in a company’s published declaration of customer service standards. These declarations are designed to outline the company’s commitment to its clients and stakeholders. Option (a) correctly identifies the commitment to quality and service as a fundamental element of such declarations, reflecting the insurer’s dedication to meeting customer expectations and maintaining high operational standards. Options (b), (c), and (d) are also important aspects, but the overarching commitment to quality and service encompasses the broader intent of these declarations. The prompt emphasizes that these declarations serve as a standard of declared intentions and a measure of performance, making a commitment to quality and service the most encompassing and foundational element.

This question tests the understanding of specific exclusions in a Product Liability policy. Option (a) correctly identifies that liability stemming from the inherent design or formulation of a product, such as a cabinet unable to support a weight exceeding its specified limit, is typically not covered. Options (b), (c), and (d) describe situations that are generally covered or are not standard exclusions. For instance, liability for property damage caused by a defective product (like the car in the CD player example) is usually within the scope of product liability, and claims from bystanders are also typically covered. Contractual liability, while often excluded, is a broader category than the specific design flaw mentioned in option (a).

The Motor Vehicles Insurance (Third Party Risks) Ordinance mandates compulsory third-party liability insurance for motor vehicles in Hong Kong. This ordinance ensures that victims of motor accidents have a recourse for compensation, even if the at-fault driver is uninsured or unable to pay. The Motor Insurers’ Bureau of Hong Kong (MIB) plays a crucial role in fulfilling the intentions of this compulsory insurance by providing a safety net where such insurance is not available or effective, funded by a levy on motor insurance premiums. Therefore, understanding the foundational legal requirement for motor insurance is key.

The scenario describes a shop owner losing cash from her bag after closing her shop. The money insurance policy explicitly states that cover is for losses occurring during normal business hours while being conveyed by a messenger. Since the loss happened outside of business hours, it falls outside the defined scope of cover for this specific policy, leading to the rejection of the claim. The policy’s wording is crucial here, limiting coverage to a specific timeframe to manage risk and premium.

The Code of Conduct for Insurers, established by the Hong Kong Federation of Insurers (HKFI), specifically addresses the standards expected in various aspects of the insurance business. Among these are the fair, efficient, and prompt handling of claims, which is a crucial element of customer service and regulatory compliance. While other regulations and ordinances touch upon insurer conduct, the Code of Conduct for Insurers is the primary document that outlines these specific expectations for claims management.

The question tests the understanding of which vessels are subject to registration in Hong Kong under the relevant legislation. Option (a) correctly identifies vessels regularly employed in trading to or from Hong Kong, unless already registered elsewhere. Option (b) is incorrect because pleasure craft are specifically mentioned as being subject to registration. Option (c) is incorrect as it describes a category of vessels that are generally required to be registered. Option (d) is incorrect because it describes a specific type of vessel (sea fishing) that is also subject to registration requirements.

This question tests the understanding of how an excess works in property damage claims under a motor insurance policy. The scenario describes a loss of HK$12,000. The policy has a voluntary excess of HK$2,000. The excess means the insured is responsible for the first HK$2,000 of the loss. Therefore, the insurer will pay the remaining amount, which is HK$12,000 – HK$2,000 = HK$10,000. The question is designed to ensure the candidate understands that the excess is deducted from the total loss to determine the insurer’s payout.

This question tests the understanding of the Insurance Claims Complaints Bureau (ICCB) in Hong Kong, a key dispute resolution mechanism for insurance policyholders. The ICCB operates under specific guidelines. Firstly, it handles complaints related to both general and long-term insurance, not just personal insurance, making statement (i) incorrect. Secondly, the service provided by the ICCB is free of charge for complainants, aligning with statement (ii). Thirdly, only the complainant can appeal against an award made by the ICCB, not the insurer, rendering statement (iii) incorrect. Finally, the maximum claim amount that the ICCB can handle is HK$1,000,000, not HK$800,000, making statement (iv) incorrect. Therefore, only statement (ii) is true.