Paper 6 Travel Insurance Agents Quiz 39

An agency agreement, being a personal relationship, is automatically terminated upon the death of either the principal or the agent. This principle applies regardless of whether the agreement has a fixed term or is ongoing. The death of a party renders the continuation of the agency impossible or fundamentally alters the basis upon which the agreement was formed. While a contract might specify terms for termination or compensation in certain scenarios, the death of a natural person party is a fundamental event that dissolves the agency relationship by operation of law, irrespective of contractual clauses that might otherwise govern termination.

This question tests the understanding of the ‘Place of Origin’ clause in travel insurance policies, specifically concerning medical expenses cover. Case 20 and Case 22 highlight that injuries or illnesses must be contracted or sustained outside the defined ‘Place of Origin’ (Hong Kong in these examples) for medical expenses to be covered. While the policy might commence coverage from the departure from residence or office, specific benefits like medical expenses have their own geographical limitations. The scenario describes an injury sustained within Hong Kong, which directly contradicts the policy’s requirement for medical expenses to arise from events occurring outside the Place of Origin. Therefore, the insurer’s rejection of the claim for medical expenses is consistent with the policy terms.

The Insurance Agents Registration Board (IARB) requires that individuals must not act or present themselves as insurance agents for a Principal before receiving official written confirmation of their registration from the IARB. This is a critical compliance requirement, and Section 77 of the Insurance Ordinance stipulates that acting as an unregistered agent is an offense, potentially leading to criminal prosecution. Therefore, an agent must wait for the Notice of Confirmation of Registration before commencing any agency business.

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. For property insurance, insurable interest must exist at the time of the loss. In this scenario, the tenant’s financial interest in the property ceases when they vacate the premises. Therefore, even though the tenant initially had an insurable interest, it no longer exists at the time of the fire, making the policy void. The landlord, as the owner, would have the insurable interest at the time of the loss.

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 the curtailment, did not necessitate an upgrade to executive class when an economy class option was available only an hour later. The insurer’s stance aligns with the policy’s provision for economy class fares for curtailment expenses, as the insured is generally expected to travel in economy class for such cover.

The question tests the understanding of the concept of ‘Deemed Treated As’ in the context of insurance regulations, specifically relating to the duties of an agent to a principal. The Insurance Ordinance (Cap. 41) and related codes of conduct often stipulate certain responsibilities that are automatically considered part of the agency relationship, even if not explicitly written in a contract. These are ‘deemed’ duties. Option A correctly identifies that these are responsibilities automatically applied by law or regulation. Option B is incorrect because while specific duties can be individually specified, the core concept of ‘deemed’ implies a default application. Option C is incorrect as it focuses on the principal’s duties, not the agent’s. Option D is incorrect because ‘fair discrimination’ relates to pricing practices, not the nature of duties owed.

The scenario highlights the insurer’s interpretation of ‘pre-existing conditions’ in the context of travel insurance. The key principle is that a condition is only considered pre-existing if it was known to the insured at the time of policy issuance and would have prompted a reasonable person to cancel the trip. In this case, while the father had a chronic renal condition, it was a routine treatment that did not, at the time of policy purchase, indicate an imminent need for cancellation. The subsequent deterioration of his condition, which led to the trip cancellation, was not a condition known to exist at the policy’s inception that would have reasonably caused the insured to cancel. Therefore, the insurer correctly admitted the claim as the circumstances leading to the cancellation were not a pre-existing condition in the sense that they would have prevented travel at the time the policy was taken out.

The question tests the understanding of policy provisions that can lead to a payout exceeding the actual loss incurred (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, thus potentially providing more than indemnity. Agreed value policies fix the sum insured at the outset, meaning the insurer pays the agreed amount in the event of a total loss, even if the market value at the time of loss is lower, exceeding strict indemnity. Reinstatement insurance allows the insurer to repair or replace the damaged property to its pre-loss condition, which can also result in a payout greater than the depreciated value of the original item. The condition of average, conversely, is a limiting clause that prevents over-insurance and ensures the payout is proportionate to the sum insured relative to the actual value of the property, thus upholding the principle of indemnity.

The scenario describes a situation where a registered person’s application for renewal is refused by the IARB. According to the Code, specifically section 5/27 (d)(iii)(1), an applicant is entitled to appeal to the Appeals Tribunal when the IARB refuses to confirm an application for registration. The Appeals Tribunal’s decisions are final, and its members are nominated by the HKFI and confirmed by the IA. The question tests the understanding of the appeal process for registration refusals 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 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 obligation to protect personal data remains.

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 if it is likely to prejudice these activities. In the scenario, the insurance company is withholding information that could aid in a criminal investigation. Therefore, the exemption related to the prevention or detection of crime would permit the disclosure of this data, overriding the general privacy principles. The other options are incorrect because they do not align with the specific exemptions provided by the PDPO for such circumstances. For instance, domestic or recreational purposes are unrelated, and while some employment-related data has exemptions, it doesn’t apply here. Similarly, the exemption for security, defence, and international relations is not the primary justification for withholding information in a crime investigation context.

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 (accepting the loss), self-insurance (setting aside funds), and transferring risk through means other than insurance (like contractual agreements) are all valid components of a risk financing program. Therefore, a program focused solely on insurance would be incomplete.

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 that the delay must meet a specified time franchise (e.g., 10 hours) and the purchases must be for essential toiletries or clothing. In this scenario, the stroller is not considered an essential item of toiletries or clothing as per the policy wording, even though the delay met the time requirement and the item was necessary. Therefore, the claim would be rejected on the basis that the purchased item does not fall within the defined scope of covered expenses.

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 particular risk assessment. The key is that the underwriting practice for single trips is simplified and does not involve detailed medical assessments.

The question tests the understanding of an insurance agent’s obligations regarding client information and disclosure. Specifically, it focuses on the requirement to treat all information supplied by a potential policyholder as confidential and to disclose it only to the relevant Principal or appointing Insurance Agent. This aligns with the principles of data privacy and professional conduct outlined in the Code of Practice for the Administration of Insurance Agents, particularly concerning the handling of personal data and maintaining client confidentiality. Option A correctly identifies this obligation. Option B is incorrect because while an agent must be competent, the scenario doesn’t directly relate to seeking advice from a Principal. Option C is incorrect as the scenario is about confidentiality, not about explaining policy differences. Option D is incorrect because the scenario does not involve making additional charges.

The Insurance Claims Complaints Bureau (ICCB) has specific terms of reference for handling complaints. One of these is that the complaint must be filed within a certain timeframe after the insurer has issued its final decision on the claim. This timeframe is crucial for ensuring that disputes are addressed promptly and that evidence remains relevant. The ICCB’s terms of reference stipulate a 6-month period from the date of notification of the insurer’s final decision. Therefore, a complaint filed 7 months after receiving the final decision would fall outside the ICCB’s jurisdiction.

The core of this question lies in interpreting the definition of ‘Accident’ as provided in the Personal Accident policy, which requires the cause to be ‘violent, external and visible means’. The medical experts’ opinion, supported by the attending physicians, concluded that the intracerebral haemorrhage was spontaneous and related to primary hypertension, not a consequence of the fall. The location of the haemorrhage (confined to the right thalamus without signs in the meningeal areas) further indicated it was not caused by external trauma. Therefore, the insurer’s repudiation was based on the finding that the death did not result from an event meeting the policy’s definition of an ‘Accident’.

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 second flight. Therefore, the insurer is only obligated to cover the economy class fare as per the policy terms.

The scenario describes a situation where the insurer rejected an accidental death benefit claim because the deceased was a passenger on a motorcycle. The insurer’s reasoning, upheld by the Complaints Panel, was that being a motorcycle passenger is considered ‘indirectly engaging in motorcycling,’ which was an excluded activity under the policy. This interpretation broadens the scope of the exclusion clause to cover indirect participation. The key principle here is the interpretation of exclusion clauses, particularly when terms like ‘directly or indirectly’ are used, and how such clauses can be applied to situations that might not be immediately obvious as direct participation in an excluded activity. The mother’s argument that her son was merely a passenger and not engaged in hazardous activities was insufficient against the panel’s interpretation of the exclusion.

The Baggage Delay section of a travel insurance policy typically covers expenses incurred due to the temporary loss of baggage for a specified minimum period after arrival at the destination. This period is often referred to as a ‘time franchise’. The policy wording specifies that the delay must be caused by the common carrier. In this scenario, the delay was caused by the hotel’s misdirection, not the airline. Therefore, the delay caused by the hotel would not be covered under the Baggage Delay section, as it is not a delay or misdirection by a common carrier.

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 considered a wager. The scenario describes a situation where an individual is insuring a property they do not own and have no financial connection to. This directly violates the principle of insurable interest. Option B is incorrect because while a policyholder must act in good faith, the core issue here is the lack of insurable interest, not a breach of good faith in the application process. Option C is incorrect as ‘indemnity’ relates to restoring the insured to their pre-loss financial position, which is a consequence of a valid insurance contract, not a prerequisite for its existence. Option D is incorrect because ‘peril’ refers to the cause of loss, and while relevant to insurance, it doesn’t address the validity of the policyholder’s right to insure.

This question tests the understanding of the definition of ‘loss of limb’ under personal accident insurance, specifically focusing on the distinction between physical separation and permanent loss of use. The scenario describes a situation where a claimant has suffered severe nerve damage and paralysis in their leg, rendering it completely useless for any form of ambulation or function, even though the limb itself has not been physically severed. According to typical personal accident policy definitions, permanent loss of use of a limb, equivalent to physical severance, qualifies for the benefit. Therefore, the claimant’s condition, preventing them from walking or standing, constitutes a loss of limb under the policy’s terms, even without amputation.

The question tests the understanding of the minimum solvency margin requirements for general business insurers in Hong Kong. According to the provided text, for general business, the solvency margin is calculated based on either ‘Premium Income’ or ‘Claims Outstanding’, whichever yields a higher figure. Crucially, there is a minimum requirement of HK$10 million for general business. However, if the insurer is carrying on ‘statutory insurance business’, this minimum is doubled to HK$20 million. The scenario describes an insurer engaged in general business and specifically mentions it is a statutory insurance business, thus triggering the higher minimum requirement.

The Insurance Agents Registration Board (IARB) requires that individuals must not act or present themselves as insurance agents for a Principal before receiving written confirmation of their registration from the IARB. This is to ensure that only properly registered individuals conduct insurance business, thereby protecting the public. Section 77 of the Insurance Ordinance makes it an offense to act as an unregistered insurance agent. Therefore, an agent cannot solicit business or represent themselves as an agent for a Principal until they have received the official Notice of Confirmation of Registration.

The principle of indemnity aims to restore the insured to the financial position they were in immediately before the loss occurred, no more and no less. In property insurance, when a loss occurs, the insurer has several methods to provide this indemnity. Reinstatement involves restoring the damaged property to its pre-loss condition. This could involve repairs or, in some cases, replacing the item if it’s beyond repair but still allows for the property to be returned to its original state. Cash payment is a direct monetary settlement. Repair is a specific action to fix damage. Replacement with a new item, while sometimes used, can go beyond strict indemnity if the original item had depreciated, as it provides a newer item than what was lost. Therefore, reinstatement is the most accurate description of restoring the property to its prior condition as a method of indemnity.

The question tests the understanding of the insurer’s responsibility regarding the clarity and fairness of proposal forms, a key aspect of the formation of an insurance contract. According to the provided syllabus, proposal forms should be in understandable language with clear guidance, carefully explain utmost good faith, ask clear questions about material facts, and explain the importance of associated questionnaires. Option (a) directly addresses these requirements by emphasizing the need for clear, unambiguous questions and explicit guidance on the significance of accurate disclosure, aligning with the principle of utmost good faith and the formation of a valid contract. Option (b) is incorrect because while insurers should not mislead, the primary focus of the proposal form is on obtaining accurate information from the applicant, not on the insurer’s internal processes for handling data. Option (c) is incorrect as the proposal form’s primary purpose is to gather information for underwriting, not to detail the claims process, which is covered in the policy document. Option (d) is incorrect because while insurers should ensure agents act fairly, the proposal form itself is a direct communication tool between the insurer and the applicant regarding the risk, and its clarity is paramount for contract formation.

The question tests the understanding of the breakdown of authorized insurers in Hong Kong as of December 31, 2013, as presented in the provided text. The text clearly states that there were 19 composite insurers, which are those carrying on both long-term and general business. The breakdown further specifies that 10 of these were Hong Kong incorporated companies and 9 were from other jurisdictions. Therefore, the total number of composite insurers is 19.

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 a crucial document, is evidence of a contract, not the contract itself. The concept of a legally enforceable agreement is central to contract law and its application in various contexts, including insurance.

This question tests the understanding of how an agency relationship can be established, specifically focusing on the concept of ratification. Ratification occurs when a principal retrospectively approves an act performed by an agent without prior authority. In this scenario, the agent exceeded their authority by offering fire insurance coverage when only authorized for household insurance. The insurer’s subsequent acceptance and confirmation of this fire insurance policy, despite the agent’s lack of initial authority, constitutes ratification. This act of ratification makes the contract valid from the moment it was initially made by the agent, effectively backdating the authority. Therefore, the agency relationship, in this specific instance of the fire insurance contract, arises by ratification.