Paper 6 Travel Insurance Agents Quiz 18

This question tests the understanding of the concept of ‘insurable interest’ as it applies to insurance contracts. Insurable interest is a fundamental principle that requires the policyholder to have a financial stake in the subject matter of the insurance. Without it, the contract is generally considered void as it could encourage wagering or intentional destruction of property. The scenario describes a situation where an individual is insuring a property they have no legal or financial connection to, which violates this principle. The other options describe situations where insurable interest typically exists: insuring one’s own property, insuring a family member’s property where there’s a clear financial dependence or benefit, or insuring a business asset where the policyholder has a direct financial interest in its continued operation.

This question tests the understanding of the ‘Place of Origin’ clause in travel insurance, specifically concerning medical expenses. Case 20 and Case 22 highlight that injuries or illnesses must be contracted or sustained outside Hong Kong (the Place of Origin) for medical expenses cover to apply. In this scenario, the insured sustained the injury while alighting from a taxi within Hong Kong, which is defined as the Place of Origin. Therefore, the insurer correctly declined the claim for medical expenses, as the policy’s specific condition for this benefit was not met, even though the travel delay benefit was applicable.

The Complaints Panel in Case 7 ruled that while a visible bruise or wound is strong evidence of an accident, other forms of proof can also be accepted. However, in this specific case, the panel considered the policyholder’s extensive history of lower back pain. This pre-existing condition, coupled with the lack of definitive evidence directly linking the braking incident to a new, accidental injury, led the panel to conclude that there was insufficient proof that the back problem was caused by an accident. Therefore, the insurer’s decision to deny the claim was upheld because the injury’s accidental origin could not be sufficiently established, despite the policyholder’s occupation and the sudden braking action.

The Insurance Authority (IA) possesses a range of statutory powers to intervene in the operations of insurers when necessary. These powers are designed to protect policyholders and maintain the stability of the insurance market. Among the available interventions, the IA can impose restrictions on an insurer’s business, limit its ability to accept new business, or even direct the insurer to cease writing certain types of business. In more severe cases, the IA can appoint an investigator, take control of the insurer’s assets, or, as a last resort, initiate liquidation proceedings. The question asks about the IA’s ability to take action to manage an insurer’s financial health and operational conduct, which directly aligns with its intervention powers. Options B, C, and D describe actions that are either outside the IA’s direct purview (like setting general market interest rates) or are consequences of intervention rather than the intervention itself (like policyholder complaints leading to market analysis).

The Complaints Panel in Case 7 ruled that while a visible bruise or wound is strong evidence of an accident, other forms of proof can also be accepted. However, in this specific case, the panel considered the policyholder’s extensive history of lower back pain. This pre-existing condition, coupled with the lack of definitive evidence directly linking the braking incident to a new, accidental injury, led the panel to conclude that there was insufficient proof that the back problem was caused by an accident. Therefore, the insurer’s decision to deny the claim was upheld because the evidence did not sufficiently demonstrate an accidental cause for the injury, despite the policyholder’s account of the braking incident.

This question tests the understanding of the distinction between assigning an insurance contract and assigning the right to insurance money, specifically concerning the requirement of insurable interest. According to the provided text, an assignment of the insurance contract requires both the assignor and assignee to possess insurable interest at the time of assignment for it to be valid. Conversely, an assignment of the right to insurance money does not necessitate insurable interest on the part of the assignee, allowing it to function as a gift. Therefore, if an assignee lacks insurable interest, the assignment can only be valid if it pertains to the right to insurance money, not the entire contract.

The scenario describes a situation where an individual, previously a fireman, sustained an injury that prevented them from continuing their specific occupation. However, the policy’s definition of Total and Permanent Disability (TPD) requires the inability to engage in *any* gainful occupation. The Fire Services Department’s efforts to find alternative employment for the individual, coupled with the Complaints Panel’s view that the disability did not preclude other forms of work, indicate that the TPD definition was not met. Therefore, the insurer’s decision to decline the waiver of premium claim, based on the insured’s ability to pursue other gainful employment, is supported by the policy’s restrictive definition of TPD.

The Personal Data (Privacy) Ordinance (PDPO) allows for ‘other means’ of compliance when a direct contractual agreement with a data processor is not feasible. This flexibility enables data users to employ non-contractual oversight and auditing mechanisms to ensure their data processors adhere to data protection requirements. This approach is crucial for maintaining data security and privacy when direct contractual enforcement is impractical, such as in certain cross-border data processing scenarios or when dealing with entities that operate under different legal frameworks. The key is that these ‘other means’ must effectively serve the purpose of monitoring and enforcing data protection standards, even in the absence of a formal contract.

This question tests the understanding of the ‘named perils’ basis of trip cancellation cover. The scenario describes a situation where a trip is cancelled due to a government-imposed travel ban. According to the provided text, trip cancellation cover is typically on a ‘named perils’ basis, meaning it only covers specific, listed causes. A government travel ban, while preventing travel, is not explicitly listed as one of the usual insured perils (such as death, serious sickness, jury duty, or damage to home). Therefore, the insurer is justified in rejecting the claim because the cause of cancellation does not fall under the defined insured events.

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 physical amputation, results in the complete and irreversible inability to use the hand for any meaningful purpose. This aligns with the policy’s definition of ‘permanent loss of use of the limb’ as it prevents the insured from performing any work or occupation requiring the use of that limb, even if the limb itself is still attached.

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 Claims Complaints Bureau (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 during the insured trip. The insurer’s responsibility is to cover unforeseen events and emergencies that are not a result of a known, excluded condition. The ICCB’s ruling reinforces the burden of proof on the insured to demonstrate that the claim falls outside the exclusion.

The question tests the understanding of the breakdown of authorized insurers in Hong Kong as of December 31, 2013, as per the provided text. The text explicitly states that there were 19 composite insurers, which are those carrying on both long-term and general business. The breakdown of these 19 composite insurers into Hong Kong incorporated and other entities is also provided, but the total number of composite insurers is the key figure here.

The question tests the understanding of the fundamental nature of a contract as a legally enforceable agreement. While many agreements exist in daily life, not all are intended to create legal obligations. Social arrangements, like a lunch appointment, are generally not considered contracts because the parties do not intend to be legally bound. The key differentiator is the intention to create legal relations and the enforceability of the promises made. An insurance policy, while evidence of an agreement, is not the contract itself but rather the document that records the terms of the legally binding contract between the insurer and the insured. Therefore, the most accurate description of a contract among the options provided is a legally enforceable agreement.

The Insurance Ordinance (Cap. 41) is the primary legislation governing the prudential supervision of the insurance industry in Hong Kong. It outlines the requirements for insurers and intermediaries, including authorization, capital requirements, and conduct. The establishment of the Insurance Authority (IA) as an independent statutory body, replacing the Office of the Commissioner of Insurance (OCI) following the Insurance Companies (Amendment) Ordinance 2015, signifies a modernization of the regulatory framework. The IA’s mandate includes protecting policyholders, promoting industry stability, and aligning Hong Kong with international regulatory practices. Therefore, the Insurance Ordinance is the foundational legal instrument for this oversight.

Insurable interest is a fundamental principle in insurance, requiring the policyholder to have a legitimate financial stake in the subject matter of the insurance. This prevents individuals from profiting from the misfortune of others or engaging in speculative gambling. The scenario describes a situation where a person has a financial interest in a debtor’s property due to a loan. However, without a legal claim or security over that specific property, such as a mortgage, the creditor’s interest is purely financial and not legally recognized as insurable in relation to the property itself. While a creditor generally has an insurable interest in the life of their debtor to recover the debt, this does not automatically extend to the debtor’s unrelated assets. Therefore, the creditor cannot insure the debtor’s property simply because they are owed money, unless they have a specific legal right or security interest in that property.

The Baggage Delay section of a travel insurance policy typically covers the cost of essential items purchased due to a delay in baggage delivery. The key conditions are the duration of the delay (often a minimum number of hours, like 10 hours) and the nature of the delay (e.g., misdirection by a common carrier). In this scenario, the delay was caused by the hotel’s misdirection, not the common carrier (airline). The policy wording is crucial here; if it specifies ‘common carrier’ for misdirection, then delays caused by third parties like hotels might not be covered. The question tests the understanding of the scope of coverage and the importance of precise policy wording regarding the cause of the delay.

An Insurance Agency is defined as a person who holds themselves out to advise on or arrange contracts of insurance in or from Hong Kong as an agent or subagent of one or more insurers. This definition encompasses entities operating as sole proprietorships, partnerships, or corporations that engage in such activities. The key is the function performed, not the legal structure of the business. Therefore, a company that facilitates insurance contracts on behalf of insurers, regardless of its internal organization, fits this description.

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 an underwriter’s decision. This is distinct from non-fraudulent misrepresentation (providing inaccurate information) and ordinary good faith (the duty not to lie or mislead when asked specific questions). While all relate to good faith, non-disclosure specifically addresses the omission of relevant information.

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, or register a responsible officer or technical representative on behalf of an insurance agent, provided the prescribed application and fee are submitted. This process is a core function of the IARB in administering the Code. The other options describe activities that are either outside the direct registration function (like setting general policy for the HKFI) or are consequences of registration rather than the act of registration itself (like issuing registration numbers or investigating complaints).

The Conduct of Insurance Agents for General Insurance Business and Restricted Scope Travel Business mandates several key principles for agents. Firstly, agents must only provide advice when they possess the necessary knowledge and qualifications to do so, ensuring the client receives accurate and appropriate guidance. Secondly, it is crucial for agents to clearly identify themselves and their affiliation before engaging in any business discussions, establishing transparency and trust. Thirdly, when comparing different policies, agents are obligated to explain the distinctions between them, enabling clients to make informed decisions. Finally, a fundamental duty is to clearly articulate the policy’s coverage and ensure the client comprehends what they are purchasing, thereby preventing misunderstandings and potential disputes. All these points are essential for ethical and compliant insurance sales practices.

This question tests the understanding of the ‘named perils’ basis for trip cancellation cover. The scenario describes a situation where the insured’s trip was cancelled due to a government-imposed travel ban. The provided text explicitly states that trip cancellation cover is typically on a ‘named perils’ basis, meaning only specific, listed causes of cancellation are covered. The government’s travel ban, while preventing the trip, is not listed as one of the usual insured perils such as death, serious illness, jury duty, or damage to the home. Therefore, the insurer is justified in rejecting the claim because the cause of cancellation does not fall under the defined insured events.

The question tests the understanding of the role of the Insurance Agents Registration Board (IARB) as established by the Hong Kong Federation of Insurers (HKFI). The IARB is responsible for registering insurance agents and handling complaints against them, as outlined in the Code of Practice for the Administration of Insurance Agents. Therefore, its primary function is regulatory oversight of insurance agents’ conduct and registration.

The policy explicitly states that the insurance indemnifies additional public transportation expenses returning to the Place of Origin based on economy class fare. The insured’s medical condition, while a factor in curtailing the trip, did not necessitate an upgrade to executive class for a flight departing only one hour later, especially when an economy class option was available for the immediately available flight. Therefore, the insurer is only obligated to cover the economy class fare as per the policy terms.

This question tests the understanding of the Personal Data (Privacy) Ordinance’s requirements for data collection. Principle 1 mandates that data users inform data subjects about the purpose of collection, classes of persons to whom data may be transferred, consequences of non-provision, and rights of access and correction. A Personal Information Collection Statement (PICS) is the prescribed method for conveying this information, typically attached to application forms. Option (a) accurately reflects these requirements. Option (b) is incorrect because while accuracy is important, it’s covered under Principle 2, not Principle 1. Option (c) is incorrect as the Ordinance does not distinguish between manual and automatic data for its scope, and the focus of Principle 1 is on the collection process, not the retention period. Option (d) is incorrect because while data processors are mentioned in the context of data retention (Principle 2), the primary disclosure requirement at the point of collection under Principle 1 concerns the classes of persons to whom data *may* be transferred, not just data processors.

The Hong Kong Federation of Insurers (HKFI) plays a crucial role in the self-regulatory framework of the insurance industry in Hong Kong. One of its key functions is to promote and advance the collective interests of insurers and reinsurers operating within the territory. This includes fostering a positive public perception of the industry by encouraging high ethical standards and professional conduct among its member organizations. The HKFI’s mission statement explicitly highlights its commitment to building consumer confidence through these efforts. The establishment of the Insurance Agents Registration Board (IARB) by the HKFI further demonstrates its dedication to maintaining professional standards and addressing consumer concerns within the insurance intermediary sector, as mandated by relevant codes of practice.

The scenario describes a situation where a flight departed on time, but the insured submitted a claim for a travel delay. The policy’s coverage for travel delay is typically based on specific, named perils. In this case, the cause of the delay (aircraft rotation) was not listed as an insured peril in the policy. Therefore, the insurer correctly rejected the claim because the event triggering the delay was not a covered cause under the terms of the travel delay benefit, which is usually provided on a named perils basis rather than an all-risks basis.

This question tests the understanding of the proximate cause principle in insurance, specifically how an uninsured peril can lead to a loss covered by an insured peril. The scenario describes a chain of events initiated by negligence (uninsured peril) leading to a collision, fire, explosion, and ultimately water damage. The key concept is that even if the initial cause is uninsured, if the loss is directly and naturally caused by a sequence of events where one of the later events is an insured peril, the loss can be recoverable. In this case, the water damage is the direct result of leaks caused by the explosion, which itself was a natural consequence of the fire, which followed the collision caused by negligence. The illustration in the syllabus explicitly states that in such a chain, the water damage is regarded as a result of its sole insured peril (entry of water), notwithstanding the uninsured proximate cause. Therefore, the cargo damage by water is recoverable under the policy covering entry of water, even though the initial cause was negligence.

Travel insurance agents, as defined under the Insurance Intermediaries Quality Assurance Scheme, are specifically authorized to deal with a ‘Restricted Scope Travel Business’. This scope is narrowly defined in the Code of Practice for the Administration of Insurance Agents to include the effecting and carrying out of contracts of travel insurance that are directly tied to a tour, travel package, trip, or other travel services that the same travel agent has arranged for their clients. Crucially, this definition explicitly excludes annual travel insurance policies and any travel insurance policies for arrangements that the travel agent has not themselves organized. Therefore, a travel insurance agent cannot sell a policy that covers a specific valuable item like a watch for its full value if it falls outside the standard coverage of a typical travel insurance package, even if the travel itself is arranged by the agent, because such a policy would not be considered ‘travel insurance’ as per the restricted definition.

The Insurance Ordinance (Cap. 41) is the primary legislation governing the prudential supervision of the insurance industry in Hong Kong. It outlines the requirements for insurers and intermediaries, including authorization, capital requirements, and conduct. The establishment of the Insurance Authority (IA) as an independent statutory body, replacing the Office of the Commissioner of Insurance (OCI) following the Insurance Companies (Amendment) Ordinance 2015, signifies a modernization of the regulatory framework. The IA’s mandate includes protecting policyholders, promoting industry stability, and facilitating market development. Therefore, understanding the foundational legislation and the role of the IA is crucial for comprehending the regulatory landscape.

The Insurance Authority (IA) has the power to intervene in an insurer’s operations to protect policyholders. One of the measures available to the IA, as outlined in the Insurance Ordinance, is the ability to impose restrictions on an insurer’s investments. This can include limitations on the types of assets the insurer can hold or the geographical locations where it can invest. This power is crucial for ensuring the financial stability of the insurer and safeguarding the interests of policyholders, especially if the insurer is engaging in risky investment strategies or facing financial difficulties. Limiting premium income, restricting new business, or requiring custody of assets by a trustee are also intervention powers, but the question specifically asks about controlling the insurer’s financial exposure through its asset holdings.