Paper 2 General Insurance Quiz 49

The ‘Schedule’ within a scheduled policy form is the section that specifically details all information pertinent to the individual risk being insured. This includes crucial data such as the policy number, the insured’s personal details, the sums insured or limits of liability, the effective dates of coverage, a description of the insured item or risk, the premium paid, and any special terms, warranties, exclusions, or endorsements that modify the standard policy wording. The Recital Clause introduces the contract and references the proposal, while the Operative Clause defines the scope of coverage and perils, and General Exceptions apply universally across the policy. Therefore, identifying the policy number falls under the purview of the Schedule.

The question tests the understanding of the definition of ‘theft’ under a typical theft insurance policy, specifically the requirement for forcible and violent entry or exit. Option A correctly states that the policy requires evidence of forced entry or exit to cover the loss. Option B is incorrect because while damage to the premises is often covered, the core definition of theft in this context hinges on the method of entry/exit, not just any damage. Option C is incorrect as theft by staff is typically excluded and falls under fidelity guarantee insurance. Option D is incorrect because while fire damage caused by thieves is a possibility, it is usually excluded from a theft policy and covered under a fire policy.

This question assesses the understanding of the positive impacts of excellent customer service in the insurance industry, specifically focusing on customer loyalty and its financial implications. Customer loyalty, driven by positive service experiences, leads to repeat business through policy renewals. Renewals are generally less costly to underwrite than acquiring new clients, making customer retention a more efficient and profitable strategy. The other options, while potentially related to good business practices, do not directly capture the primary positive outcome of customer loyalty stemming from good service in the context of recurring insurance business.

The scenario describes an individual who intentionally intervenes in a violent altercation to rescue friends. The Complaints Panel determined that the insured’s injury was not accidental because it was a foreseeable consequence of his deliberate actions in joining the fight. The key principle here is that for a personal accident claim, the injury must be the result of an unforeseen and unintentional event. By actively participating in a dangerous situation, the insured’s actions led to a predictable outcome of being injured, thus negating the ‘accidental’ nature of the event as required by personal accident policies. The insurer’s rejection was upheld because the injury was a natural and probable result of the insured’s own conduct, not a pure accident.

The scenario describes an individual who intentionally intervenes in a violent situation to rescue friends. The Complaints Panel determined that the insured’s injury was not accidental because it was a foreseeable consequence of his deliberate actions in joining the fray. The key principle here is that for a personal accident claim, the injury must be the result of an unforeseen and unintentional event. By actively participating in a dangerous situation, the insured’s actions led to a predictable outcome of being attacked, thus removing the ‘accidental’ nature of the injury as required by personal accident policies.

This question tests the understanding of how an excess works in motor insurance, specifically the difference between a voluntary and a compulsory excess, and how they interact. A voluntary excess is chosen by the policyholder to reduce the premium, while a compulsory excess is imposed by the insurer. Standard policy excesses are a type of compulsory excess that applies universally or to specific risk factors without a premium discount. In this scenario, the policyholder chose a voluntary excess of HK$5,000. The insurer then imposed a compulsory underwriting excess of HK$2,000 due to the vehicle’s high performance. Standard policy excesses, by definition, are always in parallel with other excesses and do not qualify for premium discounts. Therefore, the total excess applicable to the claim would be the sum of the voluntary excess and the compulsory underwriting excess, which is HK$7,000. The explanation that the standard policy excess would be added to the voluntary excess is incorrect because the HK$2,000 is an underwriting excess, not a standard policy excess. The explanation that only the voluntary excess applies is incorrect as compulsory excesses also apply. The explanation that the higher of the two excesses applies is incorrect as both voluntary and compulsory excesses are typically additive.

Average adjusters are specialized professionals in marine insurance, particularly for General Average (GA) claims. Their expertise is crucial due to the complexity of GA, which involves international maritime law, potentially hundreds of interested parties (like cargo owners), and lengthy investigation periods that can span years. While Lloyd’s Agents and Loss Adjusters are also involved in claims, average adjusters are specifically retained for the intricate calculations and legal considerations inherent in GA. Surveyors, while important for assessing damage, do not typically handle the complex apportionment and legal aspects of GA.

This question tests the understanding of how an excess works in motor insurance. An excess is the amount the policyholder must pay towards a claim before the insurer covers the rest. In this scenario, the damage is HK$12,000 and the voluntary excess is HK$2,000. Therefore, the insured is responsible for the first HK$2,000 of the claim, and the insurer will pay the remaining HK$10,000. The question asks how much the insurer will pay, which is the total claim minus the excess.

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 registered elsewhere. Option (b) is incorrect as pleasure craft are specifically mentioned as requiring registration. Option (c) is incorrect because while fishing vessels plying regularly in Hong Kong waters or using them as a base are covered, the phrasing is too narrow. Option (d) is incorrect as it describes a specific scenario for vessels from Mainland China or Macau that are already covered by other provisions and the exclusion of ‘accepted convention certificates’ is a specific detail not universally applicable to all such vessels.

The scenario describes a situation where an insured person sustained an injury and received a certain number of days of temporary total disability benefit and temporary partial disability benefit. The insured was dissatisfied, believing they should have received temporary total disability benefit for the entire duration. The Complaints Panel’s decision, as outlined in the provided text, was that the insurer’s offer was appropriate because the insured’s condition during the latter part of their sick leave only met the definition of Temporary Partial Disability, not Temporary Total Disability, based on the nature and severity of the injury, and the fact that the insured, being a self-employed director with office duties, could perform some of their work. This aligns with the principle that personal accident policies often differentiate benefit amounts for temporary total versus temporary partial disablement, and the determination hinges on the insured’s ability to perform their usual occupation.

Average adjusters are specialized professionals in marine insurance, particularly for General Average (GA) claims. Their expertise is crucial due to the complexity of GA, which involves international maritime law, potentially hundreds of interested parties (like cargo owners), and lengthy investigation periods that can span years. While Lloyd’s Agents often act as survey and settling agents for marine underwriters, and loss adjusters are common in other general insurance classes, average adjusters are specifically retained for the intricate calculations and legal considerations inherent in GA. Their role is distinct from the general claims handling by an insurer’s own staff or the broader scope of loss adjusters.

The question tests the understanding of the legal significance of a certificate of compulsory insurance, particularly in motor insurance. According to the provided text, a certificate of motor insurance merely confirms the existence of compulsory insurance as prescribed by law and does not detail the policy’s coverage level (e.g., Comprehensive or Act Only). The law mandates the issuance of these certificates, and failure to do so is a criminal offense. Furthermore, the law requires insurers to recover these documents if the policy is cancelled, highlighting their critical legal role. Therefore, the certificate’s primary function is to satisfy a legal requirement, not to provide a comprehensive summary of the policy’s terms.

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 modifies the policy’s scope. This allows the insurer to offer coverage for the standard risks while mitigating potential losses from the identified higher risk. Option B is incorrect because a general exclusion applies to all policyholders, not a specific risk within a policy. Option C is incorrect as a market exclusion is a standard exclusion applied across the industry, not tailored to an individual policyholder’s specific risk profile. Option D is incorrect because while fraud can invalidate a policy, it’s a separate legal principle and not a method of risk management through policy wording for an otherwise standard risk.

A warranty in insurance is an absolute undertaking by the insured to the insurer. A breach of this undertaking, regardless of its impact on the claim, can automatically discharge the insurer’s liability from the date of the breach. However, insurers in Hong Kong have provided an undertaking to the Hong Kong Federation of Insurers that they will only refuse a claim due to a breach of warranty if there is a causal connection between the breach and the loss, or if the breach is fraudulent. This means that a minor, unrelated breach would not typically lead to a claim denial under this undertaking.

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 scheme is designed to provide an accessible and cost-effective avenue for resolving complaints against insurers. It is crucial to understand its scope, operational principles, and limitations. Specifically, the ICCB handles complaints related to both general and long-term insurance policies, not just personal lines. The service is free for complainants, ensuring accessibility. While the ICCB makes recommendations, its decisions are not legally binding on the insurer, and either party can reject the outcome, effectively acting as an appeal mechanism against the ICCB’s recommendation. The maximum claim amount handled by the ICCB is HK$1,000,000, not HK$800,000. Therefore, only the statements that the scheme is free for complainants and that either party can appeal against an award are accurate.

The question tests the understanding of an insurer’s obligation regarding policy renewal. 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. The term ‘cancellation’ specifically refers to the premature termination of a policy, which is distinct from a policy lapsing due to non-renewal. Therefore, the statement that the insurer does not have to remind the insured about renewal is accurate.

The Employees’ Compensation Ordinance (ECO) mandates that employers must provide compensation to employees for injuries or death arising out of and in the course of employment. While the ECO provides a statutory framework for compensation, employers can also be liable under common law for negligence or breach of statutory duty related to workplace safety. Employees’ Compensation Insurance (ECI) policies typically cover both liabilities. The question highlights a scenario where an insurer rejected a claim because the injury did not meet the ‘arising out of and in the course of employment’ criterion under the ECO. However, the employer’s liability might still exist under common law if negligence can be proven, independent of the ECO. Therefore, the insurer’s rejection based solely on the ECO criterion might be premature if the policy also covers common law liability. Option (a) correctly identifies that the insurer’s rejection might be incomplete if the policy extends to common law liabilities, which are distinct from ECO claims.

A fire business interruption policy is designed to compensate an insured business for financial losses incurred due to a disruption of operations following a covered peril, such as fire. This compensation typically includes the loss of gross profit and continuing expenses. While the physical damage to buildings and contents is covered by a standard fire policy, business interruption insurance addresses the consequential financial losses that arise from the inability to trade. It does not cover direct third-party liabilities, which are typically addressed by other types of insurance.

In the context of marine insurance claims, the assured (the policyholder) is typically responsible for arranging and initially paying for a surveyor’s report. This report serves as an independent assessment of the cause and extent of the loss. While the surveyor’s fee is generally recoverable from the insurer as part of a valid claim, the initial appointment and payment usually fall to the assured. This contrasts with non-marine loss adjusters, who are more commonly appointed and paid by the insurer.

The Code of Conduct for Insurers in Hong Kong is designed to promote good insurance practice and protect policyholders. It covers a broad spectrum of insurer conduct, including their interactions with customers and their operational responsibilities. Specifically, it addresses how insurers should handle underwriting and claims processes to ensure fairness and efficiency. Furthermore, it explicitly outlines the rights and obligations of customers, ensuring they are informed and treated equitably. The Code also emphasizes the broader interests of customers, ensuring that their welfare is a primary consideration in all dealings. While an insurer’s role as a good corporate citizen is important, the Code of Conduct’s primary focus is on the direct relationship and transactions between the insurer and the policyholder, and the operational standards that govern these interactions. Therefore, while the industry’s public image is a consequence of good practice, it is not a direct subject matter explicitly detailed within the Code’s stipulated areas of coverage.

The question tests the understanding of the scope of third-party liability cover in Hong Kong motor insurance, specifically concerning passenger injury. While the Motor Vehicles Insurance (Third Party Risks) Ordinance mandates cover for third-party death or injury, it generally excludes liability to passengers in a private car policy. However, the ordinance requires cover for passengers in commercial vehicles. The provided text states that for motor cycles, it is not usual to grant cover for the liability of passengers, but then clarifies that cover for passengers in respect of death or injury is statutorily required. This implies that while standard policies might exclude it, the law mandates it for certain vehicle types. The key distinction is between private cars and commercial vehicles/motorcycles where passenger liability might be treated differently or mandated by law. Given the options, the most accurate statement reflecting the statutory requirement for passenger injury cover, even if not standard in all policies, is that it is statutorily required for passenger liability in respect of death or injury.

A Performance Bond is a financial guarantee, structured as a bond rather than an insurance policy, designed to ensure that a contractor fulfills their contractual obligations, specifically the completion of construction work within the agreed-upon timeframe. This aligns with the definition provided, emphasizing its role in guaranteeing project completion within a specified period.

The scenario describes a situation where an insurer has consistently accepted late premium payments without objection. This pattern of behavior, if it leads the insured to reasonably believe that punctuality is no longer a strict requirement, can lead to the insurer being prevented from enforcing the strict contractual term of timely payment in the future. This legal principle is known as waiver, where the insurer, through its conduct, relinquishes its right to enforce a specific contractual provision. Estoppel also applies if the insured reasonably relied on this conduct to their detriment. Therefore, the insurer’s past acceptance of late payments without protest is the most accurate description of the situation that could lead to a waiver of the punctuality requirement.

This question tests the understanding of how an excess works in motor insurance. An excess is the amount the policyholder must pay towards a claim before the insurer covers the rest. In this scenario, the damage is HK$12,000 and the voluntary excess is HK$2,000. Therefore, the insured is responsible for the first HK$2,000 of the claim, and the insurer will pay the remaining HK$10,000. The question asks how much the insurer will pay, which is the total claim minus the excess.

This question tests the understanding of the ‘fit and proper’ requirement for insurance brokers, which is a fundamental aspect of their licensing and ongoing supervision. The Insurance Authority (IA) mandates that all insurance brokers must be fit and proper to operate. This assessment goes beyond mere technical qualifications and encompasses aspects like integrity, financial soundness, and adherence to regulatory standards. While professional indemnity insurance and maintaining proper books are crucial operational requirements, they are components that contribute to demonstrating fitness and properness, rather than being the overarching criterion itself. Similarly, adherence to a code of conduct is a manifestation of being fit and proper, but not the primary definition of the requirement.

This question tests the understanding of how changes in the insured risk can impact the policy. The Insurance Companies Ordinance (Cap. 41) and general insurance principles dictate that if the circumstances under which a risk was insured alter for the worse, the insurer may have grounds to cancel the policy, provided they follow the correct procedures. This is because the original assessment of the risk and the premium charged are no longer valid. Option B is incorrect because while an increase in premium might be a consequence, it’s not the primary action related to a worsened risk. Option C is incorrect as a policy is not automatically voided by a change in risk; it’s a situation that may lead to cancellation or renegotiation. Option D is incorrect because while the insured might be notified, the core issue is the insurer’s right to act upon the changed risk, which includes potential cancellation.

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 way to reduce the premium. The insured chooses a higher excess amount in exchange for a lower premium. This is in addition to any compulsory excess that might apply to the policy, such as a young driver excess.

The scenario highlights the importance of the insured’s duty to notify the insurer of a potential claim as soon as reasonably possible. While the insured did report the damage within 20 days, the key issue is whether this constituted ‘as soon as reasonably possible’ given the repair had already been completed. The Complaints Panel acknowledged that the repair before notification prejudiced the insurer’s ability to investigate. However, they gave the insured the benefit of the doubt due to the simplicity of the circumstances and the verification of damage through the repair slip and parts. This implies that the panel viewed the notification as timely enough in this specific, albeit not ideal, situation. The other options are incorrect because they either misinterpret the panel’s decision or introduce concepts not central to the case. Option B is incorrect as the panel did not explicitly state the insured’s actions were a clear breach that nullified the claim, but rather a point of contention that was ultimately resolved in the insured’s favour. Option C is incorrect because the panel did not focus on the insurer’s internal procedures for handling claims but rather on the policy condition of notification. Option D is incorrect as the case did not involve a compulsory insurance class where third-party rights might override notification breaches.

A Certificate of Insurance serves as a formal confirmation of the existence of compulsory insurance, particularly in contexts like motor vehicle insurance. It is a standalone document, distinct from the main policy, providing evidence of coverage. While it confirms coverage, it does not typically detail the specific terms and conditions of the underlying policy, nor does it represent a guarantee of the insurer’s financial solvency. Its primary function is to satisfy legal requirements for proof of insurance.

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, requiring the claimant to prove the cause of loss. ‘All Risks’ cover, conversely, covers all accidental losses unless specifically excluded by the policy, shifting the burden of proof to the insurer to demonstrate an exclusion applies. The scenario describes a situation where a loss occurred, and the insurer is attempting to deny coverage by claiming the cause was not a specified peril. Under an ‘All Risks’ policy, the insurer would need to prove the loss falls under an exclusion, not that the claimant failed to prove a specified peril. Therefore, the insurer’s argument is only valid if the policy is a ‘Specified Perils’ type.