Paper 6 Travel Insurance Agents Quiz 64

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 directions. This includes reporting the failure to the IA and potentially imposing further disciplinary measures on the non-compliant party. Therefore, when a Principal or Registered Person fails to conduct a required investigation or provide requested reports, the IA can escalate the matter by reporting it to the IA and imposing further sanctions.

An agency agreement, being a personal relationship, is automatically terminated upon the death of either the principal or the agent. This principle is rooted in the personal nature of the fiduciary duty owed between the parties. If either party is a corporate entity, its liquidation or dissolution has the same effect as death for an individual, effectively ending the agency relationship due to the cessation of its legal existence and capacity to act.

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.

Under the Personal Accident section of a travel insurance policy, the beneficiary is the individual or entity designated to receive the death benefit. While an applicant can name themselves or no one, in such cases, the death benefit is legally transferred to the applicant’s estate. The estate then becomes responsible for distributing the funds according to the deceased’s will or intestacy laws. Therefore, the estate is the ultimate recipient when a specific beneficiary is not named or the insured is the beneficiary.

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 lamp was in the insured’s temporary possession and under their care while staying at the hotel, making it fall 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 question tests the understanding of the fundamental nature of a contract as a legally enforceable agreement. While many agreements exist in daily life, not all are intended to create legal obligations. Social arrangements, like a lunch appointment, are typically not considered contracts because the parties do not intend to be legally bound by them. If one party cancels, the other cannot sue for breach of contract. This distinguishes legally binding contracts from informal social arrangements. Therefore, the core characteristic that differentiates a contract from other agreements is its enforceability in a court of law.

Under the Personal Accident section of a travel insurance policy, the beneficiary is the individual or entity designated to receive the death benefit. While an applicant can name themselves or no one, in such cases, the death benefit is legally transferred to the applicant’s estate. This means the estate becomes the recipient of the payout, which will then be distributed according to the deceased’s will or intestacy laws. Therefore, designating oneself as the beneficiary ultimately results in the estate receiving the benefit.

Risk financing is a broad strategy aimed at mitigating the financial impact of losses that cannot be entirely prevented. While insurance is a primary tool, it’s not the only one. Risk assumption, where an entity accepts the potential loss, and self-insurance, where an entity sets aside funds to cover potential losses, are also key components of a risk financing program. Risk transfer, other than insurance, involves shifting the financial burden to another party through mechanisms like contractual agreements. Therefore, all these methods contribute to minimizing the adverse effects of future losses on an organization.

Risk financing is a broad strategy to mitigate the financial impact of losses. While insurance is a primary tool, it’s not the only one. Risk assumption (accepting the loss), self-insurance (setting aside funds to cover potential losses), and risk transfer other than insurance (e.g., through contractual agreements) are all valid components of a risk financing program. Therefore, a program that exclusively uses insurance would be incomplete.

The question tests the understanding of general exclusions in travel insurance policies, specifically focusing on situations where the insured’s actions or circumstances lead to a claim being denied. Option (a) correctly identifies that failure to take reasonable precautions to safeguard property or prevent injury is a common exclusion. Option (b) is incorrect because while war-like operations are excluded, the insured’s participation in a sanctioned military exercise, if properly declared and covered, would not automatically be an exclusion. Option (c) is incorrect because while travel against medical advice is excluded, the scenario doesn’t mention this. Option (d) is incorrect because while breach of government regulations can be an exclusion, the scenario describes a situation where the insured is complying with regulations, not breaching them.

This question tests the understanding of the ‘named perils’ basis for trip cancellation cover. The scenario describes a situation where the insured’s trip was cancelled due to a government-imposed travel ban. The provided text explicitly states that trip cancellation cover is typically on a ‘named perils’ basis, meaning only specific, listed causes of cancellation are covered. The government’s travel ban, while preventing the trip, is not listed as one of the usual insured perils such as death, serious illness, jury duty, or damage to the home. Therefore, the insurer is justified in rejecting the claim because the cause of cancellation does not fall under the defined insured events.

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 an insurance agent is providing information about a policy. The key aspect is the agent’s responsibility to ensure that sensitive personal data, such as a Hong Kong Identity Card (HKIC) number, is not visible through an envelope window when transmitting documents by mail or via another person. This directly relates to the principle of preventing unauthorized or accidental access to sensitive information, as outlined in the guidance for handling confidential data. The other options are less relevant: while professionalism is important, it doesn’t specifically address data security in this context; adherence to general data protection principles is too broad; and ensuring policy clarity is a separate customer service aspect.

This question tests the understanding of the concept of ‘insurable interest’ as it applies to insurance contracts. Insurable interest is a fundamental principle that requires the policyholder to have a financial stake in the subject matter of the insurance. Without it, the contract is considered a wager. The scenario describes a situation where a person takes out insurance on a property they do not own and have no financial connection to. This directly violates the principle of insurable interest. The other options describe related but distinct concepts: ‘indemnity’ refers to restoring the insured to their pre-loss financial position, ‘double insurance’ involves having multiple policies covering the same risk, and ‘excepted peril’ refers to risks specifically excluded from coverage by the policy terms.

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.

This question tests the understanding of secondary participation in criminal offenses within the insurance industry context, as outlined in the provided text. The scenario describes an insurance intermediary, Mr. Chan, who is aware of a client’s misrepresentation of material facts during the application process but chooses to remain silent and proceeds with the application. Under Hong Kong law, particularly concerning insurance fraud and the principles of aiding and abetting, remaining inactive when one has the ability and knowledge to prevent a crime can be considered participation. By not reporting the misrepresentation or advising the client against it, Mr. Chan is effectively facilitating the commission of fraud by inaction. This inaction, when coupled with the knowledge of the client’s fraudulent intent and the ability to intervene, can be construed as aiding or abetting the offense. Therefore, Mr. Chan could be held liable as a secondary party to the fraud, even though he did not actively misrepresent information himself. The other options are incorrect because they either misinterpret the concept of secondary participation (e.g., suggesting only direct involvement is punishable) or incorrectly assume that a lack of direct financial gain absolves responsibility.

The question tests the understanding of the minimum solvency margin requirements for general business insurers in Hong Kong. According to the provided text, for general business, the solvency margin is calculated based on either premium income or claims outstanding, whichever yields a higher figure. Crucially, there’s a minimum requirement of HK$10 million for general business. However, if the insurer is carrying on statutory insurance business, this minimum is doubled to HK$20 million. The scenario describes an insurer engaged in general business that also underwrites statutory insurance business, thus triggering the higher minimum requirement.

This question tests the understanding of the ‘named perils’ basis for trip cancellation cover. The scenario describes a situation where the insured’s trip was cancelled due to a government travel ban, which is a common reason for cancellation. However, the provided text explicitly states that trip cancellation cover is typically on a ‘named perils’ basis, meaning only specific, listed events trigger coverage. The examples of named perils provided include death, serious sickness, jury duty, or damage to the insured’s home. A government travel ban, while a valid reason for cancellation, is not listed as a named peril in the typical policy described. Therefore, the insurer is justified in rejecting the claim because the cause of cancellation does not fall under the specified insured events.

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, or register a responsible officer or technical representative on behalf of an insurance agent, provided the prescribed application and fee are submitted. This process is a core function of the IARB in administering the Code.

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.

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, by issuing policies for these specific risks, creates a manifestation to the client that the agent possesses the authority to grant temporary cover for these risks. Therefore, the client’s reliance on this past conduct is reasonable, and the insurer would be bound by the agent’s future acceptance of such risks due to apparent authority. Option B is incorrect because while the agent has a duty of obedience, apparent authority is about the principal’s representation to third parties, not the agent’s internal duties. Option C is incorrect as agency of necessity arises in urgent, unforeseen circumstances 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 the core of apparent authority lies in the principal’s manifestations that lead the third party to believe the agent has authority, which is precisely what the insurer’s actions demonstrated.

The scenario describes a situation where the insurer rejected an accidental death benefit claim because the deceased was a passenger on a motorcycle. The insurer’s reasoning, upheld by the Complaints Panel, was that being a motorcycle passenger is considered ‘indirectly engaging in motorcycling,’ which was an excluded activity under the policy. This interpretation broadens the scope of the exclusion clause to cover indirect participation. The key principle here is the interpretation of exclusion clauses, particularly when terms like ‘directly or indirectly’ are used, and how the insurer and a review panel might interpret ‘engaging in’ an activity.

The question tests the understanding of when the duty of disclosure applies to an insurance contract. According to common law principles, the duty to disclose material facts generally ceases once the insurance contract is concluded, unless the policy terms explicitly state otherwise or a change in risk is requested. In this scenario, the proposer discovered a new medical condition after the policy was issued but before it commenced. Since the policy terms are not mentioned as requiring disclosure of post-proposal, pre-commencement information, and the discovery was not related to a contract alteration or renewal, the proposer is not obligated to disclose this information under the common law duty of utmost good faith. The insurer might have recourse through policy exclusions if applicable, but that’s a separate issue from the disclosure duty.

The Complaints Panel in Case 7 ruled that while a visible bruise or wound is strong evidence of an accident, other forms of proof can also be accepted. However, in this specific case, the panel considered the policyholder’s extensive history of lower back pain. This pre-existing condition, coupled with the lack of definitive evidence directly linking the braking incident to a new, accidental injury, led the panel to conclude that there was insufficient proof that the back problem was caused by an accident. Therefore, the insurer’s decision to deny the claim was upheld because the evidence did not sufficiently demonstrate an accidental cause for the injury, despite the policyholder’s account of the braking incident.

This question tests the understanding of general exclusions in travel insurance policies, specifically focusing on the insured’s responsibility to take precautions. The scenario highlights a situation where the insured fails to act on a widely publicized warning about an impending strike, which is a direct contravention of a common exclusion clause. Option (a) correctly identifies this failure as a potential reason for claim denial based on the insured’s inaction following mass media warnings about civil commotion. Option (b) is incorrect because while the policy might have limits on indemnity, the core issue here is the breach of a condition. Option (c) is incorrect as the scenario doesn’t mention any specific monetary limits being exceeded, but rather a failure to adhere to policy conditions. Option (d) is incorrect because the scenario does not involve any admission of liability to a third party, which is a separate exclusion related to personal liability sections.

This question tests the understanding of the ‘new for old’ provision in travel insurance, specifically concerning the depreciation of items. Case 27, while about motor insurance, highlights the principle of indemnity and betterment, which is also relevant to travel insurance. If a policy does not have a ‘new for old’ clause, depreciation is typically deducted from the claim for older items. The scenario describes a camera that is five years old. Without a ‘new for old’ provision, the insurer would be justified in deducting for depreciation, as the repaired item would be in better condition than before the damage. Therefore, the insurer’s refusal to cover the full repair cost due to depreciation is consistent with standard indemnity principles when ‘new for old’ cover is absent.

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 crucial for public transparency and verification. The information contained within these registers must be accessible to the public, either online via the Hong Kong Federation of Insurers (HKFI) website or in person at the HKFI’s registered office during business hours. This accessibility ensures that clients and other stakeholders can confirm the registration status and details of insurance intermediaries.

This question tests the understanding of general exclusions in travel insurance policies, specifically focusing on the insured’s responsibility to take precautions. The scenario highlights a situation where the insured fails to act on a widely publicized warning about an impending strike. According to typical policy wording, such a failure to take reasonable precautions after mass media warnings about events like strikes can lead to the exclusion of claims related to losses arising from that event. Option (a) correctly identifies this principle, as the insured’s inaction in the face of a public warning about a strike would likely fall under a general exclusion for failure to take precautions.

The policy explicitly states that ‘camera body, lenses and accessories will be treated as a set’ for the purpose of the article limit. In Case 30, the insurer correctly identified the memory card as an accessory to the digital camera because it could not be used independently of the camera, nor could the camera function without it. This aligns with the policy’s definition of a set, even though they were purchased separately. Case 31 provides a contrasting example where a flash, capable of independent function and use with other devices, was not considered an accessory, thus not subject to the article limit. Therefore, the insurer’s decision to apply the HK$3,000 limit to the camera and memory card is consistent with the policy wording and the interpretation demonstrated in Case 30.

The HKFI’s ‘Guidelines on Complaint Handling’ emphasize that an insurer must ensure that individuals responsible for addressing complaints possess the necessary authority to resolve them or have direct access to those who do. This ensures that complaints can be settled efficiently and effectively without undue delay. Investigating a complaint by someone directly involved in the original issue would compromise impartiality and fairness, which are core principles of effective complaint handling. While clear communication and confidentiality are important, they do not directly address the authority needed for resolution.