Paper 2 General Insurance Quiz 37

The scenario describes a shop owner losing cash from her bag after closing her shop and while on her way home. The money policy explicitly states that cover is for losses occurring during normal business hours while being conveyed by a messenger. Since the loss happened outside business hours, it falls outside the defined scope of cover for this specific policy, leading to the rejection of the claim. The policy’s intention is to cover business money during operational periods, not personal funds or losses incurred after business hours.

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, the sums insured, 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, the Operative Clause defines the scope of cover, and General Exceptions apply universally to the entire policy. Therefore, identifying the policy number falls under the purview of the Schedule.

A General Average Act is defined as any extraordinary sacrifice or expenditure voluntarily and reasonably made or incurred in time of peril for the purpose of preserving the property imperilled in the common adventure. In this scenario, the decision to jettison a portion of the cargo to lighten the vessel and prevent it from sinking during a storm is a classic example of an extraordinary sacrifice made voluntarily and reasonably in a time of peril to save the entire marine adventure. Therefore, this action constitutes a General Average Act, and the loss incurred by the owner of the jettisoned cargo is a General Average Loss.

The scenario describes an individual injured while ice-skating. The insurer denied the claim based on a ‘winter-sports’ exclusion. The Complaints Panel, in interpreting this exclusion, considered that ‘winter-sports’ generally encompass sports played on snow or ice, regardless of the season or whether they are indoors or outdoors. Therefore, ice-skating, even indoors, falls under this broad interpretation of winter sports. This aligns with the principle that policy exclusions are interpreted based on their common understanding and the insurer’s reasonable interpretation, especially when a specific definition is not provided in the policy. The key takeaway is that the exclusion is not limited to sports played *during* winter or *outdoors*, but rather the nature of the sport itself.

The Code of Conduct for Insurers in Hong Kong is designed to promote good insurance practice and protect policyholders. It addresses various aspects of an insurer’s operations to ensure fair treatment and transparency. Specifically, the Code covers the insurer’s responsibilities towards customers, including their rights and interests, and also sets standards for underwriting and claims handling processes. While an insurer’s public image as a corporate citizen is important, the Code’s primary focus is on the direct conduct of insurance business and the protection of policyholders’ rights and interests within that context. Therefore, the industry’s public image as a good corporate citizen, while a desirable outcome, is not a direct area explicitly outlined as a covered topic within the Code’s stipulated areas of good insurance practice.

The scenario describes a situation where an insurer provides a replacement item for a non-depreciating subject matter that has been damaged. This aligns with the definition of ‘Replacement’ as a method of indemnity where the insured receives a new item to substitute the damaged one, particularly when the original item’s value doesn’t decrease over time. ‘Reinstatement’ involves restoring the damaged property to its pre-loss condition, which is not applicable here as a new item is provided. ‘Salvage’ refers to the residual value of damaged property, and ‘Repatriation Expenses’ are costs associated with returning a deceased insured’s remains. Therefore, ‘Replacement’ is the most accurate term for the indemnity provided.

The scenario describes a situation where an insured person sustained an injury and received a certain number of days of benefit. The insurer paid for a portion of the leave as temporary total disability (TTD) and the remainder as temporary partial disability (TPD). The insured disagreed, believing the entire period should be compensated as TTD. The Complaints Panel reviewed the case, considering the nature of the injury (contusion without fracture or nerve involvement), the insured’s occupation (self-employed director with primarily office duties), and the absence of complications. The panel concluded that after eight days, the insured should have been able to perform some of her duties, thus qualifying for TPD rather than TTD for the remaining five days. This aligns with the principle that personal accident policies often differentiate benefit amounts for TTD and TPD, and the determination depends on the insured’s ability to perform their usual duties. Therefore, the insurer’s offer, reflecting this distinction, was deemed appropriate.

A voluntary excess, also known as a ‘self-insured retention’ or ‘excess requested by the insured’, is an amount that the policyholder agrees to bear themselves in the event of a claim. This is typically offered by insurers as a mechanism to reduce the premium payable by the insured. The insured chooses a higher excess amount in exchange for a lower premium. This excess is in addition to any other excesses that might be applicable under the policy, such as a young driver excess or a specific excess for certain types of claims. Therefore, the primary purpose of a voluntary excess is to lower the overall insurance cost for the policyholder.

This question tests the understanding of the core principle of ‘All Risks’ insurance, which is that it covers all losses unless specifically excluded. The insurer bears the burden of proof to demonstrate that an exclusion applies. Option (b) is incorrect because while exclusions exist, the fundamental principle is broad coverage. Option (c) misrepresents the burden of proof, suggesting the insured must prove coverage. Option (d) is incorrect as ‘all risks’ does not imply coverage for every conceivable event, but rather a wide scope subject to defined exclusions.

Institute Cargo Clauses (ICC) (A) provides the broadest coverage for own damage on an ‘All Risks’ basis. This means it covers all perils except those specifically excluded. ICC (B) and ICC (C) offer coverage on a ‘specified risks’ basis, meaning only the listed perils are covered. Therefore, if a loss occurs due to a peril not explicitly listed in ICC (B) or ICC (C), it would not be covered under those clauses, whereas it would be covered under ICC (A) unless it falls under a specific exclusion. The scenario describes a loss that is not a ‘specified major casualty’ or one of the other perils listed under ICC (B) or (C). Consequently, ICC (A) would be the most appropriate cover as it is an ‘All Risks’ policy, covering all perils not excluded.

This question tests the understanding of exclusions in a Professional Indemnity (PI) policy. PI policies are designed to cover financial losses arising from professional negligence. However, they typically exclude liability stemming from dishonest or fraudulent acts by the insured professional. This exclusion is crucial because the policy is meant to cover errors in judgment or execution, not intentional wrongdoing. Options B, C, and D represent situations that might be covered under a PI policy, such as financial loss due to negligent advice, property damage from a professional error, or legal expenses incurred in defending a claim of professional misconduct.

The Employees’ Compensation Assistance Scheme (ECAS) is designed to provide a safety net when an employer’s compulsory employees’ compensation insurance is absent or ineffective. It is funded partly by a levy on insurance premiums. Therefore, if an employer fails to secure the mandatory insurance, the ECAS steps in to ensure employees receive compensation for work-related injuries or diseases, fulfilling the spirit of the Employees’ Compensation Ordinance.

This question tests the understanding of how insurers manage risk through policy endorsements. When an insurer identifies a specific, elevated risk associated with a particular aspect of a policy, such as a pre-existing back condition in personal accident insurance or a high-risk driver in motor insurance, they can choose to exclude coverage for that specific risk. This is achieved through a ‘specially worded exclusion’ or an endorsement that carves out the problematic element while allowing the rest of the policy to remain in force. This practice allows insurers to offer coverage in situations where a blanket refusal might be too restrictive, thereby balancing risk management with marketability. Options B, C, and D describe different types of exclusions or policy adjustments that do not precisely fit the scenario of tailoring coverage for a specific, identified risk within an otherwise standard policy.

The Insurance Claims Complaints Bureau (ICCB) is designed to handle disputes related to personal insurance claims. It has a jurisdictional limit of HK$800,000 for the value of the claim. Complaints exceeding this amount, or those arising from commercial, industrial, or third-party insurance, fall outside the ICCB’s purview and must be resolved through other means such as litigation or arbitration. Therefore, a dispute involving a commercial property insurance claim, regardless of its monetary value, would not be handled by the ICCB.

A Scheduled Policy Form is a common structure where the policy details, such as the insured’s name, the property covered, the sum insured, and the premium, are listed in a schedule attached to the policy document. This schedule forms an integral part of the contract. The Signature Clause, also known as the Attestation Clause, is a specific section within this scheduled policy form where the insurer formally signifies their agreement and undertaking to the terms outlined in the policy. It is the insurer’s confirmation of their commitment.

The scenario describes a situation where an insured individual suffered a back injury and received medical treatment. The insurer initially paid Temporary Total Disability (TTD) benefits. However, based on a medical examiner’s report suggesting improved trunk movement, the insurer reclassified the benefits to Temporary Partial Disability (TPD) from a specific date, arguing the insured could perform some duties. The core of the dispute lies in determining whether the insured was still unable to perform *any* work (TTD) or could perform *some* work (TPD). The Complaints Panel, in this case, gave more weight to the attending doctors’ opinions, who stated the insured was unable to perform *any* work until a later date. This indicates that the determination of TTD versus TPD hinges on the medical assessment of the insured’s ability to perform their usual occupation or any occupation, as defined by the policy. The insurer’s unilateral decision to change the benefit classification based on a single medical opinion, which conflicted with the insured’s treating physicians, was challenged. The panel’s decision highlights the importance of considering all medical evidence and the weight given to treating physicians’ opinions when assessing disability claims under personal accident policies, particularly concerning the distinction between total and partial inability to work.

This question tests the understanding of exclusions in a Professional Indemnity (PI) policy. PI policies are designed to cover financial losses arising from negligent acts or omissions in professional services. However, they typically exclude liability stemming from dishonest or fraudulent behaviour by the insured professional. This exclusion is crucial because the policy is meant to cover errors in judgment or competence, not intentional wrongdoing. Options B, C, and D represent situations that might be covered under a PI policy or are general exclusions not specific to the nature of the insured’s conduct.

The scenario describes a situation where an insured party, after experiencing a fire loss, fails to take reasonable steps to protect the damaged property from further deterioration, such as preventing water damage to electrical components. This directly contravenes the insured’s duty to minimize loss, which is a common law obligation and often explicitly stated in policy conditions. Failing to take such reasonable care can lead to the insurer reducing the claim amount or even denying it, as the additional damage is a result of the insured’s inaction rather than the original insured peril. The other options are less relevant or incorrect: while cooperation is a duty, the primary breach here is the failure to mitigate loss; admitting liability to a third party is a separate duty not mentioned; and disclosing other insurances relates to contribution, not the immediate post-loss duty to preserve property.

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 is not immediately apparent.

This question tests the understanding of when a fact is considered non-material and therefore does not need to be disclosed by an insurance proposer. According to the provided text, facts that improve or decrease the risk, are common knowledge, or that the insurer is deemed to know do not need to be revealed. In this scenario, the presence of an automatic sprinkler system is a fact that improves the risk (reduces the likelihood or severity of a fire). Therefore, it falls under the category of facts that do not need to be disclosed, making it a non-material fact in the context of fire insurance. The other options represent situations where disclosure is generally required: a previous claim history (which can affect risk assessment), a business operating with highly flammable materials (which increases risk), and a change in the sum insured (which requires insurer review and potentially re-underwriting).

The question tests the understanding of the specific limitations of motor insurance policies for motorcycles, particularly concerning theft claims. While private car policies typically cover the loss of accessories due to theft, motorcycle policies, as per market practice, often stipulate that only the entire machine being stolen is admissible for a theft claim. This means that if only accessories are stolen from a motorcycle, the ‘Own Damage/Accidental Damage’ section of the policy would not typically provide cover for that specific loss.

The scenario describes a situation where an insurer rejected a hospitalization claim based on a pre-existing condition. The insured had consulted for rectal bleeding 15 months before applying for insurance, and the insurer argued that the colon tumor, diagnosed shortly after policy inception, could not have developed in such a short period. The Complaints Panel, considering the tumor size, agreed that it likely took time to grow and that the policy excluded illnesses presenting signs or symptoms before the commencement date. Therefore, the insurer’s decision to reject the claim was upheld because the evidence suggested the condition was present, or at least had its initial signs, before the policy was in force, aligning with the pre-existing condition clause.

A Scheduled Policy Form is a common structure for insurance policies that includes a policy schedule. This schedule details specific information about the policy, such as the insured’s name, the property covered, the sum insured, and the period of insurance. The Signature Clause, also known as the Attestation Clause, is a crucial part of this form where the insurer formally confirms their commitment and undertakings under the contract. Without this signature, the policy might not be considered fully executed. While a simple contract can be verbal or inferred from conduct, and specific exclusions are tailored to individual risks, and settling agents are appointed for marine claims, the Signature Clause is the element that formally binds the insurer within the Scheduled Policy Form.

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. Option (b) refers to professional standards, option (c) to efficiency and ethics, and option (d) to claims handling, all of which are also common inclusions. However, the question asks for the most overarching and foundational commitment that underpins the others. A commitment to quality and service is the broadest statement of intent, encompassing the dedication to professional standards, efficient and ethical practices, and fair claims handling. Therefore, it serves as the primary declared intention.

A cover note is a temporary document that provides immediate evidence of insurance coverage, binding the insurer even before the final policy is issued. It is not conditional on the submission of a satisfactory proposal form later. While it offers unconditional cover, it typically includes cancellation provisions and is intended for a short duration, often replaced by a formal policy. Its primary function is to provide documentary proof of existing insurance, which is crucial for various purposes, such as vehicle registration or satisfying lender requirements.

The scenario describes a situation where an insured person’s ability to perform their usual occupation is partially restored, but not fully. The insurer’s decision to classify the latter part of the recovery period as Temporary Partial Disablement (TPD) is based on the medical assessment that the insured’s range of trunk movement had improved significantly, allowing them to perform some duties. This aligns with the policy’s provision for different benefit amounts for Temporary Total Disablement (TTD) and TPD, where TPD applies when an insured can perform some, but not all, of their usual work. The Complaints Panel’s decision to favour the attending doctors’ opinion over the insurer’s medical consultant highlights the importance of the treating physician’s assessment in determining the extent of disability, especially when there are conflicting medical views. The key distinction lies in the insured’s capacity to engage in their occupation, which, according to the medical examiner, was partially regained.

The scenario describes a situation where an insurance agent offers a significant portion of their commission back to a corporate client’s employee as an incentive to secure a large general insurance policy. This practice is explicitly prohibited under Hong Kong regulations, specifically the Code of Practice for the Administration of Insurance Agents and the minimum requirements of the Model Agency Agreement. Rebating, in this context, is considered a form of bribery and corruption because it distorts the fair assessment of risk and the legitimate reward for an intermediary’s services. It undermines the principle of honest dealings by offering an undue financial advantage to an individual connected to the insured entity, rather than the insured entity itself, without proper disclosure or consent. This practice can lead to unfair competition and compromise the integrity of the insurance market.

The question tests the understanding of an insurer’s obligation regarding policy renewals. According to general insurance principles, an insurer is not legally obligated to remind the policyholder about an approaching renewal date. If the policyholder fails to take action, the policy simply lapses at the end of its term. Cancellation, on the other hand, implies a premature termination of coverage, which is a distinct process.

A ‘Condition Precedent to the Contract’ is a term that must be fulfilled for the insurance agreement to become effective. Failure to meet this condition means the contract never legally begins. In contrast, a ‘Condition Precedent to Liability’ relates to a term whose breach invalidates a specific claim, but the contract itself may still be in force. A ‘Condition Subsequent to the Contract’ is a term that must be adhered to during the policy’s currency, but its breach typically leads to the termination of cover or a specific claim, not necessarily the invalidation of the entire contract from inception. ‘Consequential Loss’ refers to indirect financial losses resulting from an insured event, which are often excluded from property insurance but covered by specific business interruption policies.

Institute Cargo Clauses (A) provides the broadest coverage, insuring against all risks of loss or damage to the insured subject matter, except for those specifically excluded. This ‘all risks’ nature means it covers a wide array of perils, including those not explicitly listed. Clauses (B) and (C) offer more limited protection, covering only specific named perils. Clause (B) covers a broader list of specified risks than Clause (C), which is the most restrictive. Therefore, a shipment insured under Clause (A) would be covered for damage caused by a sudden, unexpected mechanical breakdown of the refrigeration unit during transit, provided it’s not an excluded peril like inherent vice or faulty packaging.