Paper 6 Travel Insurance Agents Quiz 24

This question tests the understanding of the principle of subrogation in insurance, which allows an insurer to step into the shoes of the insured to recover losses from a responsible third party after paying a claim. The scenario describes a situation where a third party’s negligence caused damage to a policyholder’s property, and the insurer has indemnified the policyholder. According to the principle of subrogation, the insurer gains the right to pursue the negligent third party for the amount paid. Option (a) correctly identifies this right. Option (b) is incorrect because while the policyholder has a duty of utmost good faith, subrogation is the insurer’s right to recover, not a duty of the policyholder to recover for the insurer. Option (c) is incorrect as the insurer’s right to recover is limited to the amount paid for the loss, not the total sum insured, and it’s about recovering from the third party, not the policyholder. Option (d) is incorrect because the insurer’s right to recover from the third party arises after they have paid the claim, not before, and it’s a consequence of indemnity, not a separate contractual obligation of the third party to the insurer.

This question tests the understanding of the distinction between different categories of retirement scheme management. Category G specifically covers group retirement schemes that provide a guaranteed capital or return. Category H, in contrast, deals with group schemes that do not offer such guarantees. Category I is for group contracts providing insurance benefits under retirement schemes, but it explicitly excludes those falling under G and H. Capital redemption (Class F) is unrelated to retirement schemes and focuses on providing a capital sum at the end of a term to replace existing capital, often for financial obligations like debenture repayment, and is not linked to human life events.

The question tests the understanding of how a travel insurance policy’s coverage period is defined, specifically differentiating between cancellation cover and other types of cover. Cancellation cover typically begins when the policy is issued and ends on the scheduled departure date. In contrast, other covers usually commence upon the insured person’s departure from their residence or office and conclude upon their return. The scenario highlights a common distinction in policy wording, where the start and end times of coverage can be precisely defined, sometimes with specific time windows relative to departure and arrival.

The Insurance Authority (IA) has the power to intervene in an insurer’s operations to protect policyholders. One such intervention, as outlined in the provided text, is the limitation of premium income. This measure is typically employed when an insurer is experiencing excessively rapid growth, which could potentially lead to difficulties in managing the associated liabilities, or if the insurer is otherwise perceived to be facing financial challenges. The other options represent different forms of intervention: restricting investments relates to the insurer’s asset management, custody of assets by a trustee is a security measure, and a special actuarial investigation is a diagnostic tool to assess the insurer’s financial health.

This question tests the understanding of the rules governing the number of principals an insurance agent can represent, specifically concerning composite insurers. 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. Therefore, an agent representing a composite insurer for both general and long-term business activities is acting for two principals. The regulation states a maximum of four principals, with no more than two being long-term insurers. Representing a composite insurer for both types of business means the agent has already used up two of their principal slots. Adding another insurer that conducts only long-term business would bring the total to three principals, with two of them being long-term insurers, which is permissible. The other options incorrectly calculate the number of principals or misinterpret the restrictions on long-term business representation.

The scenario describes a situation where an insurance agent is assisting a potential policyholder with a proposal form. According to the Code of Practice for the Administration of Insurance Agents, specifically section 5/32 (b)(1), a registered person must refrain from influencing the potential policyholder and must make it clear that the answers provided are the policyholder’s own responsibility. This ensures the integrity of the application process and prevents misrepresentation. Option B suggests the agent should proactively fill in details based on assumptions, which could lead to inaccuracies and is contrary to the principle of the policyholder’s responsibility. Option C implies the agent should only provide information if explicitly asked, which is too passive and doesn’t align with the duty to assist responsibly. Option D suggests the agent should highlight potential policyholder errors, which is a reactive approach and doesn’t address the proactive duty to ensure the policyholder understands their responsibility in providing accurate information.

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

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 have insurable interest at the time of assignment. Conversely, an assignment of the right to insurance money does not necessitate insurable interest for the assignee, functioning more like a gift. Therefore, if an assignee lacks insurable interest, the assignment is only valid if it pertains to the right to insurance money, not the entire contract.

This question tests the understanding of exclusions within hospital benefit cover, specifically concerning rehabilitation. Case 23 highlights that policies often exclude confinement for rehabilitation purposes. While the insured was referred by a doctor, the primary purpose of the stay at the MacLehose Medical Rehabilitation Centre was rehabilitation, which is explicitly excluded in many travel insurance policies, as demonstrated by the Complaints Panel’s decision in Case 23. Therefore, the insurer’s refusal to pay cash benefits for this period is consistent with typical policy terms.

This question tests the understanding of the fundamental nature of a contract within the context of insurance. A contract is defined as a legally enforceable agreement. While an insurance policy document is the tangible evidence of an insurance contract, it is not the contract itself. The contract is the underlying agreement that creates legal obligations between the insurer and the insured. Therefore, the destruction of the policy document does not invalidate the contract, as the legal enforceability stems from the agreement, not the physical paper. The other options describe aspects related to contracts or insurance but do not accurately represent the core definition of a contract as a legally enforceable agreement.

The Personal Data (Privacy) Ordinance (PDPO) allows for flexibility when a data user cannot establish a contractual relationship 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 agreements might not always be feasible, yet still requires the data user to maintain oversight.

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. The options provided represent different levels of intervention. Liquidation is the most severe action, involving the winding up of the company. Restrictions on business activities, such as limiting the types of policies an insurer can underwrite or prohibiting new business, are less severe but still significant interventions. Appointing a statutory manager is a measure where the IA takes direct control of the insurer’s management to rectify issues. Therefore, the ability to impose restrictions on an insurer’s business activities is a key intervention power granted to the IA under relevant Hong Kong insurance legislation, such as the Insurance Companies Ordinance (Cap. 41).

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 not an option, aligning with the Ordinance’s aim to provide practical solutions for data protection.

This question tests the understanding of exemptions to the Personal Data (Privacy) Ordinance (PDPO) in Hong Kong, specifically concerning the prevention or detection of crime. The PDPO allows for the disclosure of personal data without consent if it is for the purpose of preventing or detecting crime. In this scenario, the insurance company is legally permitted to disclose the policyholder’s medical information to the police for an investigation into a suspected insurance fraud case, as this falls under the exemption for the prevention and detection of crime. The other options are incorrect because they either misrepresent the scope of exemptions or suggest actions that would violate the PDPO. For instance, obtaining consent from the policyholder would be ideal but is not strictly required if the disclosure falls under a valid exemption. Disclosing data for marketing purposes or for general business operations without a specific legal basis or exemption would be a breach of the Ordinance.

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 (insured peril), then fire, explosion, and finally water damage. The key concept is that even if the ultimate cause is an uninsured peril, if an insured peril is the direct and unbroken cause of the loss, the claim may still be valid. In this case, the collision is the proximate cause of the fire, and the fire is the proximate cause of the explosion, and the explosion is the proximate cause of the leaks and subsequent water damage. Since collision and fire are insured perils, the water damage resulting from them is covered. The negligence, while the initial cause, is superseded by the insured perils in the chain of causation for the purpose of determining coverage under the respective policies.

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 travel ban, which is a common reason for cancellation. However, the provided text explicitly states that trip cancellation cover is typically on a ‘named perils’ basis, meaning only specific, listed events trigger coverage. The examples of named perils include death, serious sickness or injury of the insured or their close relations, jury duty, court appearances, compulsory quarantine, or significant damage to the insured’s home. A government travel ban, while a valid reason for cancellation, is not typically listed as a named peril in standard trip cancellation policies. Therefore, the insurer’s rejection of the claim is justified because the cause of cancellation did not fall under the specified insured events.

This question tests the understanding of the proximate cause principle in insurance, specifically how an excluded peril can affect a claim even if an insured peril is involved in the chain of events. The scenario describes a vessel collision (insured peril) leading to a fire, then an explosion, and finally seawater damage. The key is that negligence (an uninsured peril) is identified as the proximate cause of the collision. However, the illustration provided in the syllabus clarifies that even if the ultimate cause is an uninsured peril, if the chain of events links the damage to an insured peril (like entry of water), the loss is recoverable under that specific policy, provided the proximate cause isn’t an excluded peril. In this case, the damage by seawater is a direct consequence of the insured peril of entry of water, even though the chain started with negligence. Therefore, each policy covering entry of water is liable for the damage.

Principle 3 of the Personal Data (Privacy) Ordinance (PDPO) mandates that personal data should only be used for the purposes for which it was collected, or a directly related purpose, unless the data subject provides consent. In this scenario, an insurance company wishes to use customer data collected for policy administration to market unrelated financial products. This constitutes a new purpose not directly related to the original collection purpose. Therefore, explicit consent from the data subjects is required before such marketing activities can commence. Failing to obtain consent would be a breach of Principle 3.

This question assesses the understanding of how the Insurance Claims Complaints Bureau (ICCB) operates, specifically its Complaints Panel. The key point is that the Panel can consider factors beyond the literal wording of a policy. It relies on established standards of good insurance practice, as outlined in The Code of Conduct for Insurers, particularly the section on claims. Therefore, while policy wording is important, it is not the sole determinant for the Panel’s decisions. The other options represent aspects that are either secondary or not the primary basis for the Panel’s rulings.

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 cover 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 offer a policy for a precious watch that is unrelated to a specific travel package they have arranged, even if the proposer intends to take the watch on a trip.

Risk financing is a broad strategy to mitigate the financial impact of losses. While insurance is a primary tool, it’s not the only one. Risk assumption (or retention) involves accepting the financial consequences of a loss, often for smaller, predictable losses. Self-insurance is a formalised way of assuming risk, where an entity sets aside funds to cover potential losses. Risk transfer, other than insurance, could involve contractual agreements like indemnities or guarantees. Therefore, while insurance is a key component, a comprehensive risk financing programme encompasses a wider array of methods to minimise the adverse effects of future losses.

Under the Insurance Agents (Registration) Regulation, an insurance agent is permitted to represent a maximum of four principals. This limit is further nuanced: no more than two of these principals can be insurers conducting long-term business. A composite insurer, which engages in both general and long-term business, is counted as two separate principals unless the agent’s activities are exclusively focused on either general business (including restricted scope travel business) or long-term business. Similarly, a group of companies or Lloyd’s syndicates is treated as a single principal if their activities are confined to one type of business (general or long-term). If their activities span both, they count as two principals, unless the agent’s scope is restricted to one of these business types. Crucially, an agent must obtain consent from their existing principals before taking on a new one. The scenario describes an agent representing three general insurers and one composite insurer. The composite insurer counts as two principals (one general, one long-term) because the agent is involved in both general business (with the three general insurers) and long-term business (with the composite insurer). Therefore, the agent is representing a total of 3 (general insurers) + 2 (composite insurer) = 5 principals, which exceeds the regulatory limit of four.

The question tests the understanding of how a travel insurance policy’s coverage period is defined, specifically differentiating between cancellation cover and other types of cover. Cancellation cover typically begins when the policy is issued and ends on the scheduled departure date. In contrast, other covers usually commence upon the insured person’s departure from their residence or office and conclude upon their return to either location. The scenario highlights a common nuance where the policy might specify commencement and termination points, and it’s crucial to understand these distinctions for accurate coverage interpretation. The provided text explicitly states that ‘cancellation cover typically commences when a certificate of insurance is issued and terminates on the planned departure date,’ making this the correct understanding of its temporal scope.

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 an insured peril (like entry of water) is the direct cause of the loss, and the chain of events is unbroken, the loss can be recoverable under the policy covering that insured peril. The illustration in the provided text directly supports this by stating that ‘the water damage is regarded as a result of its sole insured peril, notwithstanding that this peril can be traced backward to an uninsured peril.’ Therefore, the cargo damage by seawater is recoverable under the policy covering entry of water, as it is the proximate cause of the damage, even though negligence initiated the sequence.

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 scenario describes a situation where an insurance agent is handling sensitive client information. The guidance on preventing unauthorized or accidental access by unrelated parties, as outlined in the provided text, emphasizes the use of sealed envelopes for mail, ensuring no sensitive data is visible through window envelopes, and marking mail as ‘private and confidential’ when it’s intended only for the addressee. Option (a) directly reflects these protective measures for mail transmission. Option (b) is incorrect because while data security is important, the specific measures mentioned in the text relate to physical mail handling, not digital encryption. Option (c) is incorrect as the text does not mention specific timeframes for data retention as a primary method for preventing unauthorized access during transmission. Option (d) is incorrect because while internal training is beneficial, the question specifically focuses on the physical handling and transmission of sensitive documents via mail, as detailed in the provided guidance.

Under the Personal Accident Section of a travel insurance policy, the beneficiary is the individual or entity designated to receive the death benefit. While an applicant can name themselves or no one, in such cases, the death benefit is legally transferred to the applicant’s estate. This ensures that the benefit is distributed according to the deceased’s will or the laws of intestacy, rather than being paid directly to the deceased themselves or remaining unclaimed.

The scenario describes a situation where an insured’s glass ornament was damaged during transit. The insurer denied the claim based on an exclusion for ‘fragile articles’. Case 28 explicitly states that insurers typically classify glass items as fragile for the purpose of such exclusions. Therefore, the insurer’s denial is consistent with the policy’s terms and common industry practice regarding fragile items.

Under the Personal Accident Section of a travel insurance policy, the beneficiary is the individual or entity designated to receive the death benefit. While an applicant can name themselves or no one, in such cases, the death benefit is legally transferred to the applicant’s estate. This ensures that the benefit is distributed according to the deceased’s will or the laws of intestacy, rather than being paid directly to the deceased themselves or remaining unclaimed.

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 if one party cancels. The key differentiator is the intention to create legal relations and the enforceability of the promises made. An insurance policy, while a crucial document, is evidence of a contract, not the contract itself. The other options describe aspects that might be associated with contracts but do not define the core concept of enforceability.