Paper 6 Travel Insurance Agents Quiz 62

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 usually a minimum delay period (e.g., 6 or 10 hours) and that the purchases must be ‘essential items of toiletries or clothing’. A stroller, while necessary for a baby, is generally not classified as an ‘essential item of toiletries or clothing’ under the standard wording of such policies. Therefore, the insurer’s rejection of the claim based on the nature of the purchased item is likely valid according to the policy’s terms.

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

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 core of this question lies in understanding the insurer’s interpretation of ‘pre-existing conditions’ in the context of the ‘Loss of Deposit or Cancellation’ cover. The policy proviso stipulated that losses should not arise from conditions known to exist at the time of certificate issuance that would prompt a reasonable insured to cancel. In this case, while the father had a chronic renal condition requiring regular dialysis, the insurer’s investigation revealed that this routine treatment would not have caused the insured to cancel the trip. It was only the subsequent deterioration of the father’s condition during dialysis that led to the cancellation. Therefore, the insurer accepted that the specific circumstances prompting the cancellation were not known to exist at the time of policy issuance, making the claim valid under the ‘Loss of Deposit or Cancellation’ cover.

This question tests the understanding of the principle of indemnity and its relationship with subrogation. Subrogation allows an insurer, after paying a claim, to step into the shoes of the insured and pursue recovery from a third party responsible for the loss. However, this right is contingent on the principle of indemnity, which aims to restore the insured to their pre-loss financial position, not to provide a profit. In life insurance, the loss is the death of the insured, and the sum assured is a pre-agreed amount, not a measure of actual financial loss that can be recovered from a third party. Therefore, an insurer paying a life insurance claim does not acquire subrogation rights against a negligent third party because the payment is not based on indemnity. The question specifically highlights that subrogation applies only if indemnity applies, and life insurance payouts are not considered indemnity in this context.

This question tests 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.

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 normally expected to travel on economy class tickets in such situations.

This question tests the understanding of the ‘average’ clause in non-marine property insurance, as outlined in section 3.4.7 (a) of the provided material. The ‘average’ clause, also known as underinsurance, means that if the insured property is not insured for its full value at the time of a loss, the insurer’s payout will be reduced proportionally. In this scenario, the property’s value is HK$5,000,000, but it is insured for only HK$2,000,000, meaning it is only 40% insured (HK$2,000,000 / HK$5,000,000). A loss of HK$1,000,000 occurs. Due to the average clause, the insurer will only pay 40% of the loss. Therefore, the payable amount is 40% of HK$1,000,000, which equals HK$400,000. The other options represent incorrect calculations or misinterpretations of the average clause. Option B incorrectly calculates the payable amount as the full loss minus the underinsured portion. Option C incorrectly assumes the insurer pays the full loss because the insured value is substantial, ignoring the proportional reduction. Option D incorrectly calculates the payable amount based on the difference between the sum insured and the property value.

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.

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 impact of adverse future events.

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. This asymmetry in the appeal process is a significant feature of the ICCB’s dispute resolution mechanism.

The core of the insurer’s repudiation in this scenario hinges on the interpretation of ‘Accident’ as defined in the policy, which requires the cause of death to be ‘violent, external and visible means’. Medical expert opinions indicated that the intracerebral haemorrhage was spontaneous and related to primary hypertension, not a direct consequence of the fall. The location of the haemorrhage, confined to the thalamus without involvement of areas typically affected by external trauma, supported the view that it was not caused by external means. Therefore, the death was classified as resulting from an illness rather than an accident as defined by the policy terms, justifying the insurer’s rejection of the claim.

This question tests the understanding of the principle of indemnity and its relationship with subrogation. Subrogation is a mechanism that allows an insurer, after paying a claim, to step into the shoes of the insured and pursue recovery from a third party responsible for the loss. This principle is fundamental to indemnity insurance because it prevents the insured from profiting from a loss by recovering compensation from both the insurer and the responsible third party. In life insurance, however, the payout is not based on indemnity for a specific financial loss but rather on the occurrence of a life event. Therefore, the insurer does not acquire subrogation rights against a negligent third party because the payment is not intended to indemnify a quantifiable financial loss, but rather to fulfill a contractual obligation based on the insured event. This distinguishes life insurance from general insurance principles like indemnity.

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 generally ceases once the insurer has paid the claim and exercised its subrogation rights. Option (c) is incorrect as the insurer’s right to recover is limited to the amount it has paid to the insured, not the total loss suffered by the insured. Option (d) is incorrect because while the insured must cooperate, the insurer cannot simply demand the insured’s claim without having paid the indemnity.

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 of the risk and confirmation of the policy is an act of ratification, making the contract valid from the time it was initially made, even though the agent lacked authority at that moment. This aligns with the principle that ratification gives retrospective authority. Option B is incorrect because an agent acting within their actual authority does not require ratification. Option C is incorrect as ostensible authority arises from the principal’s representation to a third party, not from the agent’s unauthorized act being subsequently approved. Option D is incorrect because an agency by agreement is formed through mutual consent, not through retrospective approval of an unauthorized act.

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 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 separate entities focused on resolving disputes related to insurance claims, particularly for personal insurance policies.

This question tests the understanding of the restrictions placed on individuals holding multiple roles within the insurance intermediary sector, specifically concerning the provision of advice. According to the provided text, a proprietor or employee of an insurance broker who provides insurance advice to a policyholder or potential policyholder is prohibited from being a proprietor or employee of, or partner in, an insurance agent. This restriction is designed to prevent conflicts of interest and ensure clarity in the advisory roles. Option (a) correctly reflects this prohibition, while the other options describe scenarios that are either permitted or do not directly address the core conflict of interest outlined in the regulations.

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 as effecting and carrying out 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 facilitate. Therefore, a travel insurance agent cannot offer a policy for a precious watch that is not part of the travel package they arranged, even if the proposer is traveling, because it falls outside the defined ‘travel insurance’ and the restricted scope of business for these agents.

The Personal Data (Privacy) Ordinance (PDPO) in Hong Kong mandates that data users must adhere to six Data Protection Principles (DPPs). Principle 1 specifically addresses the purpose and manner of collection of personal data. It requires data users to inform data subjects about the purpose of data collection, the classes of persons to whom the data may be transferred, the consequences of not providing the data, and the rights of access and correction. A Personal Information Collection Statement (PICS) is the standard method for conveying this information, typically attached to application forms. Therefore, an insurance practitioner failing to provide a PICS when collecting personal data would be in breach of DPP 1.

The Insurance Agents Registration Board (IARB) is responsible for maintaining a register of insurance agents and their appointed Responsible Officers and Technical Representatives. This register, along with a sub-register, is kept in a format determined by the Insurance Authority (IA) and must be accessible for public inspection. This accessibility is crucial for transparency and allows the public to verify the registration status of individuals acting as insurance agents. Therefore, the IARB must ensure that these registers are available for public viewing.

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

The Personal Data (Privacy) Ordinance (PDPO) in Hong Kong is designed to protect the privacy of individuals by regulating the collection, holding, processing, and use of personal data. Its scope is broad and encompasses both public and private sector organizations that handle personal data. Therefore, it applies to entities in both sectors, not exclusively to one or the other, nor to neither.

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, and are not directly responsible for the registration or conduct of agents.

The scenario describes a situation where an insured’s glass ornament was damaged during transit. Travel insurance policies typically exclude coverage for ‘fragile articles’ under the baggage and personal effects section. Glass items are generally considered fragile by insurers. Therefore, the insurer’s denial of the claim based on the exclusion for fragile articles is consistent with standard policy terms and conditions, as illustrated by Case 28 in the provided materials.

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, the repair cost is HK$75,000. According to the terms of the policy, the insurer’s liability for this single article is capped at the single article limit. Therefore, the maximum amount the insurer will pay is HK$50,000, even though the repair cost and the sum insured for the vase are higher. This demonstrates the application of a policy limit that restricts coverage for individual high-value items within a general policy.

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.

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 whatsoever. In this scenario, the principal’s consistent allowance of the agent to negotiate terms and sign contracts, coupled with the absence of any clear communication to third parties about the agent’s limited authority, creates an appearance of authority. Therefore, the principal would be bound by the contract signed by the agent, as the third party reasonably relied on the principal’s manifestations.

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. This asymmetry in the appeal process is a significant feature of the ICCB’s dispute resolution mechanism.

This question tests the understanding of how different types of risks are typically handled by commercial insurers. Pure risks, by definition, only present the possibility of loss or no change, making them insurable because the potential for gain is absent, thus aligning with the principle of indemnity. Speculative risks, however, involve the possibility of both gain and loss. Insuring speculative risks would undermine the principle of indemnity and create moral hazard, as the insured would have a direct financial incentive to incur the loss to realize a gain through the insurance payout. Therefore, commercial insurers primarily focus on pure risks.