Paper 6 Travel Insurance Agents Quiz 15

The question tests the understanding of provisions that can lead to a payout exceeding the actual loss incurred, which deviates from the principle of indemnity. ‘New for Old’ cover means that if an insured item is damaged or destroyed, it is replaced with a new item of the same type, regardless of the age or condition of the original item. This can result in a payout greater than the depreciated value of the lost item, thus exceeding pure indemnity. Agreed value policies fix the value of the insured item at the commencement of the policy. If a total loss occurs, the insurer pays the agreed value, which might be higher than the market value at the time of the loss, again going beyond strict indemnity. Reinstatement insurance allows the insured to repair or replace the lost or damaged property with property of the same kind and quality, without deduction for depreciation. This also means the payout can be more than the indemnity value of the original item. The condition of average, conversely, is a clause designed to prevent underinsurance. If the sum insured is less than the value of the property, the claim payout is reduced proportionally, enforcing indemnity rather than exceeding it.

The scenario describes a situation where an insured person requires immediate medical attention due to dizziness. The insurer denied the request for emergency evacuation because the insured had a pre-existing condition of hypertension, which was excluded from the policy. The Insurance Complaints Committee (ICCB) upheld the insurer’s decision, stating that the insured needed to prove her condition was unrelated to hypertension. This highlights the principle that pre-existing conditions, especially those excluded by the policy, are generally not covered under emergency services, even if they manifest with symptoms that could be mistaken for an acute issue. The insurer’s responsibility is to assess the root cause of the medical condition based on available information, and if it’s linked to an exclusion, they are justified in denying coverage.

The question tests the understanding of when an individual can legally represent themselves as a Responsible Officer (RO) or Technical Representative (TR) for an insurance agent. According to the provided text, it is a breach of the Code to hold oneself out as an RO or TR before being registered by the IARB. This registration is confirmed by a Notice of Confirmation of Registration. Therefore, any activity or representation as an RO or TR prior to this official confirmation is considered improper and can impact the individual’s fitness and properness.

This question tests the understanding of the definition of ‘loss of limb’ under personal accident insurance, specifically focusing on the distinction between physical severance and permanent loss of use. The scenario describes a situation where the insured’s hand is severely damaged by a chemical burn, leading to its complete inability to function, even though it remains physically attached. According to typical policy definitions, this would constitute a ‘permanent loss of use’ of the limb, qualifying for the benefit, as it renders the limb functionally useless, akin to physical separation. Options B and C describe conditions that might lead to disability but do not meet the specific definition of ‘loss of limb’ as per the policy. Option D describes a temporary condition that does not meet the ‘permanent’ requirement.

This question tests the understanding of personal liability coverage under travel insurance, specifically focusing on the exclusions. The scenario describes damage to a hotel’s property, which falls under third-party property damage. However, the key exclusion here is liability for damage to property that is in the ‘care, custody, or control’ of the insured person. Hotel guests are generally considered to have the hotel’s property in their care, custody, or control while using it. Therefore, the insurer would likely deny coverage based on this exclusion, even if the damage was accidental. The other options represent situations that might be covered or are irrelevant to this specific exclusion.

The Insurance Authority (IA) mandates that a Registered Person’s qualification for a passed IIQE paper becomes invalid if they do not engage in insurance-related work in Hong Kong for two consecutive years after passing the examination. This rule is designed to ensure that intermediaries maintain current knowledge and skills relevant to the industry. Therefore, if a person passes the IIQE but then ceases to work in the insurance sector for two years, they would need to retake the relevant papers to be considered qualified again.

The Insurance Ordinance (Cap. 41) governs the insurance industry in Hong Kong. The question tests the understanding of the fundamental principle of utmost good faith, which is a cornerstone of insurance contracts. Non-fraudulent non-disclosure occurs when a party negligently or innocently fails to reveal material facts that would influence a prudent underwriter’s decision. This is a breach of the duty of utmost good faith, distinct from ordinary good faith which only requires truthful answers to direct questions. While all options relate to breaches of good faith, only non-fraudulent non-disclosure specifically addresses the negligent omission of material facts.

This question tests the understanding of the concept of ‘insurable interest’ and when it is required in insurance contracts, as per Hong Kong insurance regulations. Insurable interest is a fundamental principle that a policyholder must have a financial stake in the subject matter of the insurance. While it’s generally required at the inception of the policy, its necessity at the time of loss can vary depending on the type of insurance. For life insurance, insurable interest is typically required at the policy’s commencement. However, for property insurance, it is generally required both at the inception of the policy and at the time of loss to prevent speculative insurance. The question asks about the timing of this requirement, and the correct answer reflects the general rule for property insurance, which is a common area tested in IIQE exams.

The question tests the understanding of underwriting practices in travel insurance, specifically concerning single trip policies versus annual policies. The provided text states that single trip risks are not individually underwritten, meaning the insurer does not typically inquire about the medical history of the insured for these policies. This contrasts with annual policies, where such inquiries are common. Therefore, the absence of detailed medical history questions on a single trip proposal form is a reflection of this underwriting approach, not a waiver of the insured’s duty to disclose material facts. The legal obligation to disclose material facts remains, regardless of whether the proposal form explicitly asks about them. Failure to disclose a material fact, even if not asked, can still lead to the insurer avoiding the contract. Option (a) correctly identifies this distinction and the ongoing duty of disclosure. Option (b) is incorrect because while the form may not ask, the duty to disclose still exists. Option (c) is incorrect as underwriting for single trips is generally less intensive, not more, than for annual policies. Option (d) is incorrect because the absence of a question does not negate the legal requirement for disclosure.

This question tests the understanding of the ‘period of free look’ in insurance contracts, a concept mandated by regulations to protect policyholders. The Insurance Companies Ordinance (Cap. 41) and its subsidiary legislation, such as the Insurance (General Business) Regulation, stipulate that policyholders have a right to review their insurance policy after issuance. During this period, they can cancel the policy and receive a refund of any premiums paid, subject to certain conditions like no claims being made. This provision ensures that consumers have adequate time to understand the terms and conditions of their policy and make an informed decision, preventing mis-selling or misunderstanding of coverage.

The scenario describes a situation where a proposer for a fire insurance policy fails to disclose the presence of an automatic sprinkler system. According to the principles of utmost good faith and the definition of a material fact, a fact need not be disclosed if it diminishes the risk. An automatic sprinkler system is a protective measure that reduces the likelihood and severity of fire damage, thereby lowering the risk. Consequently, a prudent insurer would likely view this fact as reducing the risk and potentially influencing the premium calculation downwards. Therefore, its non-disclosure, in the absence of specific inquiry, does not constitute a breach of the duty of utmost good faith because it falls under the category of facts that diminish the risk.

This question tests the understanding of the restrictions placed on individuals holding multiple roles within the insurance intermediary sector, specifically concerning directors of insurance agents and brokers. According to the provided text, a proprietor or employee of an insurance broker who provides insurance advice to policyholders cannot simultaneously be a director of an insurance agent if that director also provides advice to policyholders of the insurance agent. The scenario describes Mr. Chan, who is a director of an insurance agent and also provides advice. He then becomes a director of an insurance broker. The crucial point is whether he provides advice to policyholders of the insurance broker. If he does, and he also provides advice for the insurance agent, this creates a conflict under the regulations. The regulation states that if a director of an insurance agent provides advice, they can be a director of another insurance agent or broker only if they *do not* provide advice to the other company. Since Mr. Chan provides advice for the insurance agent, and the question implies he would also be involved in advising for the insurance broker, this scenario would likely violate the provisions if he advises for both. Option A correctly identifies this potential conflict, as the regulations aim to prevent such dual advisory roles when an individual is a director of both types of entities.

The question tests the understanding of underwriting practices in travel insurance, specifically concerning single trip policies versus annual policies. The provided text explicitly states that single trip risks are not individually underwritten, meaning the insurer does not typically inquire about the insured’s medical history for these policies. This contrasts with annual policies, where such inquiries are common. Therefore, a proposal for a single trip that omits medical history details, even if not explicitly asked for on the form, is generally acceptable from an underwriting perspective for that specific type of policy, as the insurer has not requested this information for that risk type. The key is that the underwriting practice for single trips differs significantly from other types of insurance or even annual travel policies.

This question tests the understanding of the rules governing the number of principals an insurance agent can represent, specifically focusing on the distinction between composite insurers and groups of companies. According to the regulations, a composite insurer counts as two principals (one general and one long-term) unless the agent’s activities are restricted to only one of these business types. Similarly, a group of companies is treated as one principal if its activities are limited to either general or long-term business, or two principals if its activities span both, unless the agent’s scope is restricted to one. Therefore, an agent representing a composite insurer and a group of companies, both of which conduct both general and long-term business, and the agent’s activities are not restricted to a single business type, would be representing a total of four principals (two from the composite insurer and two from the group of companies). This scenario adheres to the maximum limit of four principals, with no more than two being long-term insurers.

The Insurance Agents Registration Board (IARB) is responsible for registering insurance agents, responsible officers, and technical representatives. According to the provided text, the IARB may register an insurance agent on behalf of a Principal upon application and payment of the prescribed fee. This registration is for a specified period, not exceeding three years. Re-registration can be applied for within a specific window before the current registration expires. The question tests the understanding of the IARB’s role in the registration process and the duration of such registrations, as outlined in the Code.

The Hong Kong Federation of Insurers (HKFI) is the primary industry body representing authorized insurers in Hong Kong. Its core mission includes promoting insurance to the public and fostering consumer confidence in the insurance sector. The Insurance Agents Registration Board (IARB) is a subsidiary of the HKFI, specifically tasked with registering insurance agents and managing complaints against them, as outlined in the Code of Practice for the Administration of Insurance Agents. The Insurance Claims Complaints Bureau and Panel are distinct entities focused on resolving disputes related to insurance claims, particularly for personal insurance policies.

The Insurance Authority (IA) has the power to impose further disciplinary action on a Principal or Registered Person if they fail to comply with a requirement from the Insurance Authority Registration Board (IARB) to take disciplinary action. This is outlined in the procedures for handling complaints against registered persons. The IA can report such non-compliance to the IA and then impose its own disciplinary measures on the party that failed to act.

This question tests the understanding of secondary participation in criminal offenses within the insurance industry context, as outlined in the provided text. The scenario describes an insurance intermediary, Mr. Chan, who is aware that his colleague, Ms. Lee, is providing misleading information to a client about a policy’s benefits. By failing to intervene or report this misconduct, Mr. Chan is actively enabling Ms. Lee’s fraudulent activity. Under the principles of secondary participation, aiding, abetting, counseling, or procuring the commission of an offense makes one equally responsible as the principal perpetrator. Therefore, Mr. Chan’s inaction, when he has the knowledge and opportunity to prevent the fraud, constitutes aiding and abetting the offense, making him liable under the relevant legislation, such as Section 77(1) of the Insurance Ordinance, which addresses offenses related to misleading information.

This question tests the understanding of ‘New for Old’ cover, a policy provision that deviates from strict indemnity. In a ‘New for Old’ scenario, the insurer agrees to replace damaged items with new ones, without deducting for wear and tear or depreciation. This is a common feature in household and marine hull policies, designed to provide a more favourable outcome for the policyholder than a strict indemnity would allow, thereby enhancing customer satisfaction and marketability. The other options represent different concepts: ‘Agreed Value’ policies fix the sum insured based on an expert valuation, ‘Reinstatement’ policies allow for replacement without depreciation deductions (similar to ‘New for Old’ but often used in commercial lines), and ‘Contribution’ is a doctrine that applies between insurers in cases of double insurance.

The scenario describes a situation where an insurance agent is handling sensitive client information. The core principle being tested is the protection of personal data from unauthorized access, particularly when transmitting it. The provided text emphasizes the use of sealed envelopes, ensuring no sensitive data is visible through windows, and marking mail as ‘private and confidential’ when sent via mail or another person. This directly aligns with preventing accidental or unauthorized access by unrelated parties. Option (a) correctly identifies the need for secure handling and transmission methods to safeguard client data, reflecting the guidance on mail and personal delivery. Option (b) is incorrect because while data accuracy is important, it doesn’t directly address the transmission security aspect. Option (c) is incorrect as it focuses on the internal storage of data, not its transmission. Option (d) is incorrect because while client consent is crucial for data usage, it doesn’t negate the requirement for secure transmission of that data.

This question tests the understanding of the definition of ‘loss of limb’ under a personal accident policy, specifically focusing on the distinction between physical separation and permanent loss of use. The scenario describes a severe injury that, while not a complete physical severance, renders the limb permanently unusable for its intended function. According to typical policy definitions, permanent loss of use of a limb at or above the wrist or ankle is considered a ‘loss of limb’ for benefit purposes, even without physical separation. Option B is incorrect because while the injury is severe, it doesn’t meet the criteria for third-degree burns. Option C is incorrect as the scenario does not involve loss of sight or hearing. Option D is incorrect because the scenario does not describe loss of speech.

The Insurance Agents Registration Board (IARB) is responsible for maintaining a register of insurance agents and their appointed Responsible Officers and Technical Representatives. This register, along with a sub-register, is crucial for public transparency and regulatory oversight. The information contained within these registers must be accessible to the public, either through the Hong Kong Federation of Insurers (HKFI) website or in person at the HKFI’s registered office during business hours. This accessibility ensures that stakeholders can verify the registration status of individuals and entities involved in the insurance agency business, thereby upholding the integrity of the industry.

This question tests the understanding of the ‘average’ clause in non-marine property insurance, as outlined in section 3.4.7(a) of the provided material. The average clause, also known as underinsurance, applies when the sum insured is less than the actual value of the property at the time of the loss. In such cases, the insurer’s liability is reduced proportionally to the extent of the underinsurance. The formula for calculating the payable amount is: (Sum Insured / Actual Value of Property) * Amount of Loss. In this scenario, the property’s value is $5,000,000, but it is insured for only $2,000,000. The loss incurred is $1,000,000. Therefore, the property is underinsured by a factor of \(\frac{$2,000,000}{$5,000,000} = 0.4\) or 40%. Applying the average clause, the insurer will pay 40% of the loss, which is \(0.4 \times $1,000,000 = $400,000\). Option (a) correctly reflects this calculation.

The question tests the understanding of policy provisions that can lead to a payout exceeding the actual loss incurred (i.e., more than indemnity). ‘New for Old’ cover means that if an item is damaged, it is replaced with a new one, regardless of the age or depreciation of the original item. This often results in a payout greater than the indemnity value of the damaged item. Agreed value policies fix the value of the insured item at the outset of the policy. If the item is a total loss, the insurer pays the agreed value, which might be higher than the market value at the time of the loss, thus exceeding strict indemnity. Reinstatement insurance allows the insured to repair or replace the damaged property, and the insurer pays the cost of this, which can sometimes be more than the indemnity value if replacement costs have risen. The condition of average, conversely, is a clause designed to prevent underinsurance by ensuring that the payout is proportionate to the sum insured relative to the actual value of the property. If the property is underinsured, the payout will be less than the loss, not more, and it enforces indemnity.

The Personal Data (Privacy) Ordinance (PDPO) allows for flexibility when a data user cannot establish a contractual agreement with a data processor. In such situations, the Ordinance permits the use of ‘other means’ to ensure compliance with data protection requirements. These ‘other means’ are not explicitly defined but generally refer to non-contractual oversight and auditing mechanisms that a data user can implement to monitor the data processor’s adherence to data protection principles. This approach acknowledges that direct contractual enforcement might not always be feasible, but the responsibility for data protection remains with the data user.

The HKFI’s ‘Guidelines on Complaint Handling’ emphasize a structured approach to managing customer grievances. A core principle is ensuring that investigations are conducted by individuals not directly involved in the original issue to maintain impartiality. Furthermore, those tasked with responding to complaints must possess the authority to resolve them or have immediate access to someone who does. This ensures that complaints can be addressed efficiently and effectively, without unnecessary delays caused by a lack of decision-making power. The other options describe aspects of complaint handling but do not represent the primary requirement for independence and authority in the investigation and resolution process.

The Personal Money cover typically indemnifies for losses of cash, banknotes, travellers’ cheques, and money orders directly resulting from theft, robbery, or burglary. While the insured’s wallet was stolen, the insurer’s stance in Case 35 suggests that a preceding act of negligence, such as leaving the wallet unattended in a public place, might be interpreted as breaking the direct causal link required for a theft claim under this specific cover. The insurer’s view is that the loss was attributable to the insured’s own carelessness rather than solely to the act of theft itself. Therefore, the claim would likely be declined because the loss was not considered a direct result of theft in the context of the policy’s interpretation, especially if the policy wording emphasizes a clear and unbroken chain of events from the insured peril to the loss.

This question tests the understanding of the ‘period of free look’ in insurance policies, a regulatory requirement designed to protect policyholders. Under Hong Kong insurance regulations, specifically related to the Insurance Companies Ordinance (Cap. 41), policyholders are typically granted a cooling-off period after receiving their policy documents. During this period, they can review the policy terms and conditions and, if unsatisfied, cancel the policy and receive a refund of premiums paid, subject to certain deductions for medical expenses incurred or administrative costs. This provision ensures that consumers have adequate time to understand their commitments and are not pressured into purchasing unsuitable products. The other options represent common insurance terms but do not specifically refer to the initial review period granted to policyholders after policy issuance.

This question tests the understanding of general exclusions in travel insurance policies, specifically focusing on the insured’s responsibility to act upon information disseminated through mass media. The scenario highlights a situation where a strike was widely reported, and the insured failed to take precautions. According to typical policy wording, such a failure, especially when warnings are available through general mass media, can lead to the exclusion of claims related to the consequences of that event. Option (a) correctly identifies this principle, as the insured’s inaction following a widely publicized warning about a strike would likely fall under a general exclusion for failing to take precautions after mass media notification. Option (b) is incorrect because while failure to take reasonable steps to safeguard property is an exclusion, the key element here is the mass media warning. Option (c) is incorrect as the policy doesn’t necessarily exclude all acts of civil commotion, but rather the insured’s failure to react to warnings about them. Option (d) is incorrect because the scenario doesn’t involve a breach of government prohibition or regulation, but rather a failure to act on public information.

This question tests the understanding of how different types of risks are typically handled by commercial insurers. Pure risks, by definition, only present the possibility of loss or no change, making them insurable because the potential for gain is absent, thus aligning with the principle of indemnity. Speculative risks, however, involve the possibility of both gain and loss. Insuring speculative risks would undermine the principle of indemnity and create moral hazard, as the insured would have a direct incentive to incur the loss to realize a gain. Fundamental risks, affecting large populations, are generally considered uninsurable by commercial insurers due to the immense financial exposure and the difficulty in managing such widespread perils. Particular risks, affecting individuals or small groups, are the primary focus of commercial insurance. Therefore, the statement that commercial insurers primarily insure pure and particular risks, while avoiding speculative and fundamental risks, accurately reflects the insurance market.