Paper 6 Travel Insurance Agents Quiz 55

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 enhance customer satisfaction by providing a more generous payout than strict indemnity would allow. The other options represent different concepts: ‘Reinstatement insurance’ is similar but typically applies to property and is often found in commercial policies; ‘Agreed value policies’ fix the sum insured based on an expert valuation, usually for high-value items where depreciation is minimal or subjective, and the payout for partial loss is typically the actual loss amount, not the agreed value; and ‘Contribution’ is a doctrine that applies between insurers in cases of double insurance to ensure no single insurer pays more than their proportionate share of the loss.

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 the theft to be covered. The policy wording often implies that the loss must be a direct consequence of the insured peril, and a failure to exercise reasonable care could be seen as an intervening cause. Therefore, the insurer’s denial, based on the insured leaving the wallet behind, aligns with a strict interpretation of direct causation, even though the ultimate loss was due to theft.

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 indeed acting for two principals.

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 scenario describes a situation where a policyholder has insured their valuable antique vase for HK$500,000 within a broader household contents policy. However, the policy has a specific ‘single article limit’ of HK$50,000 for any one item. When the vase is damaged and the repair cost is HK$75,000, the insurer’s liability is capped by this single article limit. Therefore, the maximum amount the insurer will pay is HK$50,000, even though the repair cost and the item’s insured value exceed this limit. This provision is designed to manage the insurer’s exposure to high-value individual items within a general contents policy.

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 in Seoul, which is outside Hong Kong. Therefore, the insurer’s denial of the medical expenses claim based on the injury occurring within Hong Kong would be incorrect, as the policy explicitly requires the event to be outside the Place of Origin. The insurer’s initial rejection in Case 22 was due to a lack of evidence, but the underlying principle was that the injury needed to be sustained outside Hong Kong. The fact that the insured sought treatment after returning to Hong Kong does not negate the location where the injury was sustained.

The Conduct of Insurance Agents for General Insurance Business and Restricted Scope Travel Business mandates several key principles for agents. Firstly, agents must only offer advice when they possess the necessary expertise and knowledge to do so effectively, ensuring the client receives accurate guidance. Secondly, it is crucial for agents to clearly identify themselves and their affiliation before engaging in any business discussions, promoting transparency and trust. Thirdly, when comparing different policies, agents are obligated to explain the distinctions between them, enabling clients to make informed decisions. Finally, agents must thoroughly explain the coverage provided by a policy and confirm that the client comprehends what they are purchasing, thereby fulfilling their duty of care and ensuring client understanding. All these points are essential for ethical and compliant insurance sales practices.

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 insured’s medical history for these policies. This contrasts with annual policies, where such inquiries are common. Therefore, a proposer for a single trip policy is not expected to proactively disclose their medical history unless specifically asked, as the underwriting process for such policies is simplified and focuses on trip details and age. The legal obligation to disclose material facts still exists, but the practical application in single trip underwriting is limited by the scope of the insurer’s inquiry.

The scenario highlights a critical aspect of regulatory compliance for individuals acting as Responsible Officers or Technical Representatives for insurance agents. The Insurance Authority (IA) and the Insurance Agents Registration Board (IARB) have specific requirements regarding when an individual can legally hold these positions. It is a breach of the Code of Conduct to represent oneself as a Responsible Officer or Technical Representative before formal registration with the IARB. This registration must be confirmed by the IARB through a Notice of Confirmation of Registration. Acting in such a capacity before this official confirmation can be considered a breach of fitness and properness, potentially impacting the individual’s and the agent’s standing. Therefore, the correct action is to await the official confirmation of registration before commencing duties in these roles.

This question tests the understanding of the ‘period of free look’ in insurance contracts, a key consumer protection measure. The Insurance Companies Ordinance (Cap. 41 of the Laws of Hong Kong) mandates that policyholders have a right to review their policy within a specified period after receiving it. During this ‘free look’ period, the policyholder can cancel the policy and receive a refund of any premiums paid, subject to certain administrative charges. This provision is designed to ensure that policyholders fully understand the terms and conditions of their insurance before being irrevocably bound by the contract, promoting transparency and fairness in the insurance market. The other options represent incorrect interpretations of policyholder rights or common insurance practices.

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, even though the travel delay benefit was paid. The commencement of cover from the residence or office is a general policy term, but specific benefit sections, like medical expenses, have their own geographical limitations.

The Complaints Panel applies the ‘balance of probabilities’ standard of proof in determining whether an insured person knew of a pre-existing medical condition when applying for insurance. This standard means that the panel will find a fact to be true if it is more likely than not to be true, based on the evidence presented. In Case 15, the insured had a history of eye problems, including laser treatment for retinal degeneration two months prior to her application, and further treatments at later dates. The panel considered this long history of eye issues to be material, justifying the insurer’s rejection of the claim and policy rescission due to non-disclosure. This aligns with the principle that an applicant must disclose facts they know or ought to know that are material to the risk being insured.

The Insurance Agents Authority (IAA) is responsible for maintaining registers of insurance agents, their responsible officers, and technical representatives. These registers are crucial for public transparency and verification of an individual’s registration status. The Hong Kong Federation of Insurers (HKFI) website is designated as the platform where the public can access these registers during normal working hours, ensuring accessibility and compliance with regulatory requirements for public inspection.

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 (a) directly reflects this requirement by emphasizing the agent’s duty to avoid undue influence and clarify the applicant’s accountability for the information provided. Option (b) is incorrect because while an agent should explain policy benefits, the primary focus in assisting with a proposal is on the accuracy and ownership of the applicant’s statements, not on highlighting potential future benefits which could be seen as persuasive. Option (c) is incorrect as the agent’s role is to facilitate accurate disclosure, not to pre-emptively correct information without the applicant’s input or understanding, which could lead to misrepresentation if done incorrectly. Option (d) is incorrect because while an agent should be knowledgeable, the core principle in assisting with a proposal is to ensure the applicant understands their responsibility for the information, rather than the agent taking on the responsibility of verifying every detail independently, which could be misconstrued as influencing the applicant.

This question tests the understanding of the principle of subrogation in insurance, specifically how it operates after a claim has been settled. Subrogation allows the insurer, after paying a claim, to step into the shoes of the insured and pursue any rights the insured may have against a third party responsible for the loss. This prevents the insured from recovering twice for the same loss and ensures that the responsible party bears the ultimate cost. The scenario describes a situation where an insured has been compensated for damage caused by a negligent third party. The insurer, having paid the claim, now has the right to pursue the negligent party for the amount paid, as per the principle of subrogation. Option B is incorrect because while the insured has a duty of utmost good faith, subrogation is a right that arises after a claim payment. Option C is incorrect as the insurer’s right is to recover from the third party, not to increase the policy limit. Option D is incorrect because the insured cannot waive their rights against the third party after the insurer has paid the claim, as this would prejudice the insurer’s subrogation rights.

The scenario describes a situation where an insured person was admitted to a rehabilitation center after an initial hospital stay for a fractured femur. The insurer denied the hospital cash benefit for the rehabilitation period, citing a policy exclusion for ‘any confinement for the purpose of nursing, convalescent, rehabilitation, extended care or rest facilities.’ The Complaints Panel upheld the insurer’s decision because the rehabilitation center’s discharge summary confirmed the confinement was solely for rehabilitation. This aligns with the principle that hospital cash benefits typically cover confinement due to illness or accidental injury requiring active medical treatment, not primarily for recovery or therapy after the acute phase of treatment, as illustrated in Case 23 of the provided material which is relevant to travel insurance policies.

The Insurance Claims Complaints Bureau (ICCB) Panel has the authority to make awards against insurers. A key aspect of this power is that the insurer against whom an award is made has no right of appeal. This means the insurer cannot challenge the Panel’s decision through an appeal process. However, the complainant, if dissatisfied with the award, retains the option to pursue legal recourse.

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. Therefore, the insurer’s decision to decline the claim was based on the interpretation of the exclusion clause as encompassing indirect involvement in the excluded activity.

The principle of indemnity aims to restore the insured to the financial position they were in 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, as a method of indemnity, involves restoring the damaged property to its condition immediately prior to the loss. This is distinct from simply paying the cash value of the damage or replacing the item with a new one, as it focuses on the physical restoration of the original item. Cash payment is a direct financial settlement, while replacement involves providing a new item, which might not be the same as the original and could lead to betterment for the insured if depreciation is not accounted for. Repair is a form of reinstatement but typically refers to fixing specific damages rather than a full restoration to the pre-loss state.

The Conduct of Insurance Agents for General Insurance Business and Restricted Scope Travel Business mandates several key principles for agents. Firstly, agents must only offer advice when they possess the necessary expertise and knowledge to do so effectively, ensuring the client receives accurate guidance. Secondly, it is crucial for agents to clearly identify themselves and their affiliation before engaging in any business discussions, promoting 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 future disputes. All these points are essential for ethical and compliant insurance sales practices.

Apparent authority arises when a principal’s actions lead a third party to reasonably believe that an agent has the authority to act on their behalf, even if that authority was not explicitly granted. This is distinct from estoppel, which applies when someone is held out as an agent without any authority at all. In this scenario, the principal’s consistent allowance of the employee to negotiate terms and sign agreements, coupled with the employee’s continued representation of authority, creates an appearance of authority in the eyes of the supplier. Therefore, the principal is bound by the agreement because the supplier reasonably relied on this apparent authority.

The Insurance Claims Complaints Bureau (ICCB) Panel has the authority to make awards against insurers. A key aspect of this power is that the insurer against whom an award is made has no right of appeal. This means the insurer cannot challenge the Panel’s decision through an appeal process. However, the complainant, if dissatisfied with the award, retains the option to pursue legal avenues for redress. The maximum award limit is HK$800,000, and the Panel considers policy terms, good insurance practice, and applicable laws when making rulings, with a provision to override unfair policy terms.

The Insurance Agents Registration Board (IARB) is responsible for assessing the compliance of Registered Persons (RPs) with Continuing Professional Development (CPD) requirements. According to the relevant guidance, an RP registered to engage in the sale of specified investment products (RSTB) who has fulfilled all CPD hours for an assessment year within that year is considered qualified to maintain their registration for an additional 12 months, provided they also meet other fitness and properness criteria. This ensures that RPs remain knowledgeable and competent in their field, particularly concerning investment products.

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 of loss under the terms of the travel delay benefit. It’s crucial to differentiate between departure and arrival delays, as policies may not cover both, and the specific perils listed for delay coverage are paramount.

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.

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 did not organize. Therefore, a travel insurance agent cannot sell a policy that covers a specific valuable item with an ‘all risks’ clause if that policy is not intrinsically part of the travel package they arranged, even if the item is intended for travel. The core limitation is the direct linkage to the travel services arranged by the agent and the nature of the insurance being specifically ‘travel insurance’ as defined.

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 is settled, the insurer has several methods to provide this indemnity. One of these methods is reinstatement, which involves restoring the damaged property to its pre-loss condition. This can be achieved through repair or replacement of the damaged parts. If the insurer chooses to replace the item with a new one, and the original item had depreciated, providing a brand-new replacement without accounting for depreciation would exceed the principle of indemnity by placing the insured in a better financial position. Therefore, to adhere to indemnity, any depreciation on the original item must be considered when providing a replacement.

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 the insured’s property, and the insurer has indemnified the insured. 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 insured has a duty of utmost good faith, subrogation is a right of the insurer, not a duty of the insured to the third party. Option (c) is incorrect as the insurer’s right to recover is limited to the amount paid for the loss, not the total value of the policy or the insured’s potential profit. Option (d) is incorrect because the insured cannot recover twice for the same loss; once the insurer has paid and exercised subrogation, the insured’s claim against the third party for that specific loss is extinguished.

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 equivalent to physical loss. Therefore, the insured’s inability to perform any work due to the permanent loss of function in their hand would qualify for the benefit, assuming other policy conditions are met. Option B is incorrect because it focuses on the inability to perform the *specific* occupation rather than *any* occupation. Option C is incorrect as the policy definition typically refers to loss of use, not just a reduction in earning capacity. Option D is incorrect because the scenario implies a permanent condition, not a temporary one.

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 provide the policyholder’s medical information to the police for an investigation into a potential insurance fraud case, as this falls under the exemption for the prevention or detection of crime. The other options are incorrect because they either suggest a need for consent when an exemption applies, or propose actions that are not covered by any specific exemption under the PDPO.