Paper 6 Travel Insurance Agents Quiz 63

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 Insurance Agents Registration Board (IARB) is responsible for registering insurance agents, responsible officers, and technical representatives. According to the provided text, the IARB may register an insurance agent on behalf of a Principal upon application and payment of the prescribed fee. This registration is for a specified period, not exceeding three years. Re-registration can be applied for within a specific window before the current registration expires. The question tests the understanding of the IARB’s role in the registration process and the duration of such registrations, as outlined in the Code.

This question tests the understanding of the ‘period of free look’ in insurance contracts, a concept mandated by regulations to protect policyholders. The Insurance Companies Ordinance (Cap. 41) and its subsidiary legislation, such as the Insurance (General Business) Regulation, stipulate that policyholders have a right to review their insurance policy after it has been issued. During this period, they 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 coverage before being irrevocably bound by the contract, promoting transparency and consumer protection in the insurance market.

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 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 property and is often found in commercial policies; ‘Agreed value policies’ fix the sum insured based on an expert valuation, and while they avoid depreciation deductions in total loss, partial losses are usually assessed on actual loss; and ‘Contribution’ is a doctrine that applies between insurers in cases of double insurance, not a benefit provided to the policyholder directly in the context of claim settlement for wear and tear.

This question tests the understanding of the distinction between assigning an insurance contract and assigning the right to insurance money, specifically concerning the requirement of insurable interest. According to the provided text, an assignment of the insurance contract requires both the assignor and the assignee to possess insurable interest at the time of assignment for it to be valid. Conversely, an assignment of the right to insurance money does not necessitate insurable interest on the part of the assignee, allowing it to function as a gift. Therefore, if an assignee lacks insurable interest, the assignment is only valid if it pertains to the proceeds and not the contract itself.

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 role. Option (a) correctly reflects this prohibition. Option (b) is incorrect because while a director of an insurance agent can be a director of another insurance agent or broker, they cannot provide advice to the other entity if they provide advice to their primary company. Option (c) is incorrect as it misstates the restriction; an employee of an insurance agent can be a director of an insurance broker, but the restriction applies to the provision of advice. Option (d) is incorrect because it suggests a proprietor of an insurance agent can be a partner in an insurance broker without any conditions, which is contrary to the regulations.

This question tests the understanding of the remedies available to an insurer when the duty of utmost good faith is breached. Specifically, it focuses on the insurer’s right to avoid the contract. According to the principles of insurance law, an insurer can avoid the entire contract from its inception if there’s a breach of utmost good faith. This means the policy is treated as if it never existed. Premiums paid are generally returned, unless the breach was fraudulent on the part of the insured. The key here is that the insurer cannot selectively avoid the contract for a specific claim or period while keeping it valid for others; the entire contract is at risk. Therefore, the most accurate statement is that the insurer can choose to void the entire agreement from the outset.

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 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 the duration of the delay (often a minimum number of hours, like 10 hours) and the nature of the delay (e.g., misdirection by a common carrier). In this scenario, the delay was caused by the hotel’s misdirection, not the common carrier (airline). The policy wording is crucial here; if it specifies ‘common carrier’ for misdirection, then delays caused by other parties like hotels might not be covered. The question tests the understanding of the scope of coverage and the importance of precise policy wording regarding the cause of the delay.

The scenario highlights the interpretation of ‘pre-existing conditions’ in travel insurance, specifically concerning the ‘Loss of Deposit or Cancellation’ cover. The policy excluded losses arising from conditions known to exist at the time of certificate issuance that would prompt a reasonable person to cancel the trip. Initially, the insurer declined the claim because the father’s renal failure was a chronic condition existing before the policy was issued. However, upon further investigation, the insurer found that the father’s condition, while chronic, was stable and did not, in itself, necessitate the cancellation of the trip at the time the policy was purchased. The deterioration occurred later, leading to the cancellation. The insurer’s revised stance was that the relevant ‘pre-existing condition’ is one that, at the policy’s inception, would have been sufficient to cause a reasonable insured to cancel their travel plans. Since the father’s condition was not at a critical stage at the time of purchase that would have led to cancellation, and the deterioration happened subsequently, the exclusion did not apply. Therefore, the insurer accepted the claim.

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.

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 registration requirements. Holding oneself out as a Responsible Officer or Technical Representative before formal registration with the IARB is considered a breach of the Code of Conduct. This breach can negatively impact the ‘fitness and properness’ assessment of the individual and the insurance agent they intend to represent. Therefore, it is imperative that such individuals only commence their roles after their registration is confirmed by the IARB, as indicated by the Notice of Confirmation of Registration.

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 Insurance Complaints Committee (ICCB) has specific terms of reference for handling complaints. One crucial condition is that the complaint must be related to a claim. If the dispute arises from a situation where the insurer has not yet made a final decision on the claim, or if the complaint is about something other than a claim settlement, the ICCB would not have the jurisdiction to investigate. Therefore, a complaint about an insurer’s alleged misrepresentation of policy terms, without a specific claim being rejected or mishandled, falls outside the ICCB’s purview.

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

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 this activity. An individual agent, conversely, is a natural person who performs these functions. Therefore, an entity structured as a corporation and licensed to conduct insurance business in Hong Kong, advising clients on various insurance products and facilitating policy arrangements on behalf of insurers, fits the description of an Insurance Agency.

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 financial loss that can be recovered from a third party. Therefore, an insurer paying out on a life policy does not have a right of subrogation against a negligent party because the payment is not based on indemnity. The question specifically asks about a situation where the insurer *would not* acquire subrogation rights, and the life insurance scenario is the classic example where indemnity does not apply in the same way as in general insurance.

This question tests the understanding of the concept of ‘insurable interest’ and when it is required in insurance contracts, as per Hong Kong insurance regulations. Insurable interest is a fundamental principle that the policyholder must have a financial stake in the subject matter of the insurance. While it is generally required at the inception of the policy, there are specific circumstances, particularly in life insurance, where it is also crucial at the time of loss. The question probes the nuances of this requirement, differentiating between when it’s needed for the contract to be valid versus when it’s specifically relevant to the payout.

An agency agreement is a personal contract. The death of either the principal or the agent fundamentally alters the capacity and nature of the parties involved, thus terminating the agreement. This is distinct from situations where a company is involved, as the corporate entity’s existence continues even if key personnel change, unless it undergoes liquidation, which is a separate event that also terminates the agency.

The Insurance Authority (IA) has the power to impose disciplinary actions on registered persons and principals if they fail to comply with the IA’s directives. This includes situations where a principal or registered person does not diligently investigate a complaint referred by the IA or fails to provide requested reports within the stipulated timeframe. The IA can then report such non-compliance to the IA and impose further disciplinary measures on the non-compliant entity.

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 unless the insured could prove her condition was unrelated to hypertension, the denial was valid. This highlights the principle that pre-existing conditions, especially those excluded by the policy, are generally not covered under emergency services, even if the immediate symptoms appear acute. The insurer’s responsibility is to assess the root cause of the medical issue, not just the immediate presentation, in relation to the policy’s terms and exclusions.

This question tests the understanding of the definition of ‘loss of limb’ under personal accident insurance, specifically focusing on the distinction between physical severance and permanent loss of use. The scenario describes a situation where a policyholder suffers a severe injury that permanently impairs the function of their hand, preventing them from performing their profession. According to typical policy definitions, ‘loss of limb’ includes not only physical amputation but also the permanent and irrecoverable loss of the use of a limb, even if it remains physically attached. Therefore, the inability to perform one’s occupation due to the permanent loss of function of the hand would qualify as a loss of limb under the policy.

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 the collective interests of insurers and reinsurers operating within the territory. The HKFI actively works to enhance consumer trust and confidence in the insurance sector by advocating for and upholding high standards of professional conduct and ethical practices among its member organizations. This commitment to integrity and professionalism is central to its mission and its influence on the market.

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. The scenario describes an insured person experiencing symptoms after returning to Hong Kong, but the illness was contracted during the trip abroad. The key is that the contraction of the illness occurred outside Hong Kong, even if symptoms manifested later. Therefore, the insurer is liable for the medical expenses incurred in Hong Kong for an illness contracted overseas.

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 excluded from the policy. The Insurance Complaints Committee (ICCB) upheld the insurer’s decision, stating that the insured needed to 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 with symptoms that might appear acute. The insurer’s responsibility is to cover unforeseen events and emergencies that are not a consequence of known, excluded medical history. The ICCB’s ruling reinforces the burden of proof on the insured to demonstrate that the current medical issue is independent of the excluded condition.

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 a policyholder has insured their valuable antique vase for HK$500,000 within a broader household contents policy. However, the policy contains a specific ‘single article limit’ of HK$50,000 for any one item. When the vase is damaged and the repair cost is HK$70,000, 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 total sum insured for contents is much higher and the repair cost exceeds this limit. This provision is designed to manage the insurer’s exposure to high-value individual items that might not have been specifically declared and separately insured.

This question tests the understanding of the remedies available to an insurer when the duty of utmost good faith is breached. Specifically, it focuses on the insurer’s right to avoid the contract. According to the principles of insurance law, an insurer can avoid the entire contract from its inception if there’s a breach of utmost good faith. This means the policy is treated as if it never existed. Premiums paid are generally returned, unless the breach was fraudulent. The key here is that the insurer cannot selectively avoid coverage for a specific claim or period while keeping the policy active for other parts, as partial rescission is not a permissible remedy. Therefore, the most accurate and comprehensive remedy described is the avoidance of the entire contract.

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 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. Therefore, the insurer is justified in only covering the economy class fare.

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 insurance 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, and while they avoid depreciation issues in total loss, partial losses are usually assessed on actual loss; and ‘Contribution’ is a doctrine that applies between insurers in cases of double insurance to ensure no insurer pays more than their proportionate share of the loss.