Paper 6 Travel Insurance Agents Quiz 58

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 finally water damage. The key concept is that even if the ultimate cause is an uninsured peril, if an insured peril (like fire or explosion) is a direct and natural consequence in the chain of causation, the loss stemming from that insured peril can be covered. The illustration in the provided text explicitly states that water damage resulting from leaks caused by an explosion, which was caused by a fire, which was caused by a collision due to negligence, is recoverable under policies covering collision, fire, and explosion, respectively, because the water damage is regarded as a result of the sole insured peril in each case, despite tracing back to an uninsured peril. Therefore, the loss from the insured peril (fire, explosion) is covered, even though it was proximately caused by negligence.

This question tests the understanding of personal liability coverage under travel insurance, specifically focusing on the exclusions. The scenario describes damage to a hotel’s property, which falls under third-party property damage. However, the policy explicitly excludes liability for damage to property that is in the care, custody, or control of the insured person. In this case, the hotel’s property (the table lamp) was under the insured’s temporary possession and responsibility while staying at the hotel, thus falling under this exclusion. Therefore, the insurer would likely deny coverage for this specific claim based on the policy’s exclusions, even though it’s a third-party claim.

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 insurer rejected the claim because the cause of the delay (aircraft rotation) was not listed as an insured peril in the policy. This highlights that travel delay coverage is usually not an ‘all risks’ cover but rather a ‘named perils’ cover, meaning only the explicitly listed causes of delay are covered. Therefore, if the cause of the delay is not a named peril, the claim will be denied, regardless of whether the flight was actually delayed.

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 specifies that there were 19 composite insurers, which conduct both long-term and general business. Of these, 10 were Hong Kong incorporated companies and 9 were from other jurisdictions. Therefore, the total number of composite insurers authorized was 19.

An Insurance Agency, as defined by the Code of Conduct, is a person who holds themselves out to advise on or arrange insurance contracts 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. Individual Agents are distinct from Insurance Agencies, as they are individuals registered to conduct insurance business. Responsible Officers and Technical Representatives are roles within an insurance agency or for an individual agent, not the entity itself. Restricted Scope Travel Business is a specific type of insurance business, not the definition of an insurance agency.

The scenario describes an individual, Mr. Chan, who has been confirmed for registration as a Technical Representative by the IARB and is awaiting the official start date. Holding himself out as a Technical Representative before this confirmed date, even if registration is confirmed, constitutes a breach of the Code. The Code emphasizes that a person cannot act as a Responsible Officer or Technical Representative for an insurance agent until the IARB specifies the registration commencement date. Therefore, Mr. Chan’s actions are a violation, potentially impacting his fitness and properness.

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 foster and advance the collective interests of insurance and reinsurance companies operating within the territory. This includes actively participating in and influencing the self-regulatory processes that govern the market, thereby contributing to its stability and integrity. The HKFI’s mission statement further emphasizes its commitment to promoting insurance and building consumer trust by upholding high ethical standards and professional conduct among its member organizations.

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 insurer rejected the claim because the cause of the delay (aircraft rotation) was not listed as an insured peril in the policy. This highlights that travel delay coverage is usually not an ‘all risks’ coverage but rather a ‘named perils’ coverage, meaning only the explicitly listed causes of delay are covered. Therefore, the insurer’s rejection is valid based on the policy’s terms.

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 are higher. This demonstrates the application of a policy limit that restricts coverage for individual high-value items when they are not specifically declared and insured separately.

This question tests the understanding of the distinction between different categories of retirement scheme management. Category G specifically covers group retirement scheme contracts that provide a guaranteed capital or return. Category H, in contrast, covers those that do not offer such guarantees. Category I is for group contracts providing insurance benefits under retirement schemes, but explicitly excludes those falling under G and H. Therefore, a group retirement scheme that assures a specific minimum return on contributions aligns with the definition of Category G.

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 explicitly excluded from the policy. The ICCB’s ruling supports the insurer’s decision, stating that the insured must 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 attributable to known, excluded conditions. Therefore, the insurer acted correctly by denying the claim based on the exclusion clause for pre-existing hypertension.

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, apprehending or prosecuting offenders, or assessing or collecting taxes. In this scenario, the insurance company is legally permitted to disclose the policyholder’s medical information to the police for the investigation of 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 misrepresent the scope of exemptions or suggest actions that would violate the PDPO without a valid legal basis.

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

The scenario describes a situation where an applicant for a commercial fire insurance policy fails to disclose the presence of an automatic sprinkler system. According to the principles of utmost good faith and the definition of a material fact, facts that diminish the risk do not need to be disclosed in the absence of an inquiry. An automatic sprinkler system is a protective measure that would likely lead an insurer to set a lower premium, thus indicating a reduced risk. Therefore, its non-disclosure, in this context, does not constitute a breach of the duty of utmost good faith. The other options are incorrect because they misinterpret the duty of disclosure. Disclosing facts that are common knowledge or already known to the insurer is not required. Furthermore, the duty of disclosure primarily applies to facts that would influence the insurer’s decision-making regarding acceptance of the risk or premium calculation, not to facts that inherently reduce the risk without being specifically asked.

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 explicitly excludes those falling under G and H. Capital redemption business (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 debt repayment, and is not linked to human life events.

The question tests the understanding of ‘deemed’ duties in an agency relationship. The Insurance Ordinance (Cap. 41) and related codes of conduct establish certain responsibilities for insurance intermediaries. These responsibilities are often described as ‘deemed’ or ‘treated as’ applying, meaning they are legally imposed or implied, even if not explicitly written into every individual contract. This aligns with the concept of duties owed by an agent to a principal, which include exercising due care and skill, and obeying legitimate orders. Option (a) accurately reflects this by stating that duties are considered to apply or are individually specified, encompassing both implied and explicit responsibilities. Option (b) is incorrect because while specific instructions are important, the concept of ‘deemed’ duties implies a broader set of responsibilities beyond just explicit instructions. Option (c) is incorrect as it focuses solely on remuneration, which is a duty owed by the principal to the agent, not the other way around. Option (d) is incorrect because while the Insurance Ordinance sets out requirements, the term ‘deemed’ refers to the nature of these duties being imposed by law or implication, not just their existence within the Ordinance.

The Complaints Panel applies the ‘balance of probabilities’ standard of proof in determining whether an insured individual knew of a pre-existing medical condition when applying for insurance. This standard means that the insurer must demonstrate that it is more likely than not that the insured possessed this knowledge. Case 16 illustrates a situation where the panel found the insurer’s repudiation of the policy to be disproportionate to the non-disclosure, especially when the undisclosed ailments were minor, long-standing, and asymptomatic for a significant period. The insured’s argument of forgetting due to the lack of recent symptoms, supported by a doctor’s report, influenced the panel’s decision. This highlights that not all non-disclosed facts, even if technically material, will automatically lead to policy repudiation if the circumstances suggest a lack of intent to deceive or if the non-disclosure is deemed minor in the context of the overall risk.

The question asks to identify insurance policy provisions that might result in a payout exceeding the actual loss incurred (i.e., more than indemnity). ‘New for Old’ cover means that if an insured item is damaged, it will be replaced with a new item, even if the original item was old. This can lead to a payout greater than the depreciated value of the original item, thus exceeding pure indemnity. Agreed value policies fix the value of the insured item at the commencement of the policy. If a total loss occurs, the insurer pays the agreed value, which might be higher than the market value at the time of the loss, again going beyond strict indemnity. Reinstatement insurance allows the insured to replace the lost or damaged property with new property of a similar kind and quality, which can also result in a payout exceeding the indemnity principle if the cost of replacement is higher than the item’s value before the loss. The condition of average, conversely, is a principle designed to prevent underinsurance by ensuring that the payout is proportionate to the value insured. If the sum insured is less than the value of the property, the claim payment is reduced proportionally, thus upholding the principle of indemnity rather than exceeding it.

The core of this question lies in interpreting the definition of ‘Accident’ as provided in the 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 caused by external means. The location of the haemorrhage (confined to the right thalamus without signs in the meningeal areas) further supported the absence of 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, but rather from an illness.

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 use during the trip. The restriction is on the nature of the insurance product and its direct linkage to the travel services provided by the agent, not merely on the purpose of the travel.

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 potential insurance fraud case, as this falls under a recognized exemption to privacy rights. 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 for every disclosure related to crime prevention would be impractical and defeat the purpose of the exemption, and disclosing data for marketing purposes or without a legitimate basis would be a breach of the Ordinance.

This question tests the understanding of ‘New for Old’ cover, a policy provision that deviates from strict indemnity. In a ‘New for Old’ scenario, the insurer agrees to replace damaged items with new ones, without deducting for wear and tear or depreciation. This is a common feature in household and marine hull policies, designed to provide a more favourable outcome for the policyholder than a strict indemnity would allow, often as a marketing or customer relations strategy. The other options represent different concepts: reinstatement insurance is similar but typically applies to commercial property and is often specified in the policy wording; agreed value policies fix the sum insured based on an expert valuation, and while they avoid depreciation issues in total loss, they may still apply depreciation in partial losses in non-marine contexts; and marine policies, while often valued, have specific rules for partial losses that differ from the ‘New for Old’ concept.

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 hasn’t been 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 role in client interactions, creates a reasonable perception of authority in the eyes of the client. Therefore, the client can rely on the employee’s representations regarding the policy terms, as the principal has manifested this apparent authority.

This question tests the understanding of the principle of subrogation in insurance, specifically how it operates after a loss has been paid. Subrogation allows the insurer, after indemnifying the insured, 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 cost. Option (b) is incorrect because the insured’s right to sue the third party is transferred to the insurer upon payment, not retained. Option (c) is incorrect as the insurer’s right is to recover from the responsible third party, not to claim an additional sum from the insured. Option (d) is incorrect because while the insurer may choose to waive its rights, subrogation itself is a right that arises from the contract and law, not a discretionary act of the insured.

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.

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 six months from the date the insurer provides its final decision on the claim. If the complaint is filed outside this timeframe, the ICCB cannot consider it, regardless of whether the insurer is a member or the policy type. Therefore, a complaint filed seven months after the final decision notification would be outside the ICCB’s jurisdiction.

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 means that if the insured event occurs, the policyholder must suffer a direct financial loss. A creditor has an insurable interest in the life of their debtor because the debtor’s death could lead to the non-repayment of the debt, thus causing a financial loss to the creditor. However, this interest is limited to the amount of the debt. A business partner, while having a financial interest in the business, does not automatically have an insurable interest in the life of their partner unless the partnership agreement or specific circumstances create a direct financial dependency on the partner’s life for the surviving partner’s financial well-being. A landlord insuring a tenant’s property would generally not have insurable interest unless they are liable for damage or loss to that property, or if the tenant’s default on rent is directly tied to the property’s condition.

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 ‘Marine policies’ are generally valued, meaning the agreed value applies to both total and partial losses, which is a distinct characteristic.

This question tests the understanding of apparent authority, a key concept in agency law relevant to the IIQE syllabus. Apparent authority arises when a principal’s actions lead a third party to reasonably believe that an agent has the authority to act on the principal’s behalf, even if the agent lacks actual authority. In this scenario, the insurer (principal) consistently issued policies for cargo risks to West Africa, despite explicitly forbidding the underwriting agent from accepting such risks. This pattern of conduct by the insurer created a reasonable belief in the client that the agent possessed the authority to grant temporary cover for these specific risks. Therefore, the insurer is bound by the agent’s actions due to apparent authority, as the client dealt with the agent based on the insurer’s manifestations. Option B is incorrect because while the agent acted against express instructions, the principal’s conduct created the appearance of authority. Option C is incorrect as agency of necessity applies in urgent situations where communication is impossible, which is not the case here. Option D is incorrect because agency by estoppel prevents a principal from denying an agent’s authority when they have represented it, but apparent authority is more directly applicable here due to the principal’s consistent actions creating the belief of authority, rather than a specific representation that the agent was authorized when they were not at all.

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. The panel considered this long history of eye issues to be material, and therefore the insurer’s rejection of the claim and rescission of the policy due to non-disclosure was deemed appropriate. This aligns with the principle that an applicant has a duty to disclose all material facts they know or ought to know.