Paper 6 Travel Insurance Agents Quiz 69

This question tests the understanding of the ‘named perils’ basis of 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. A government travel ban, while a valid reason for cancelling a trip, is not usually listed as a ‘named peril’ in standard travel insurance policies for trip cancellation. Therefore, the insurer is correct in rejecting the claim because the cause of cancellation does not fall under the specified insured events.

The scenario describes a situation where the insured’s trip was cancelled due to a government-imposed travel ban related to an epidemic. The provided text emphasizes that trip cancellation cover is typically on a ‘named perils’ basis, meaning only specific, listed events trigger coverage. The government’s refusal of entry, while a valid reason for cancellation, is not explicitly listed as a ‘named peril’ in the examples provided (such as death, serious sickness, jury duty, or home damage). Therefore, the insurer is justified in rejecting the claim because the cause of cancellation does not fall under the defined insured events.

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 deny 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.

The Personal Money cover in the IIQE syllabus typically indemnifies for losses of specified forms of money (cash, banknotes, travellers’ cheques, money orders) directly resulting from theft, robbery, or burglary. While the insured’s wallet was lost, the insurer’s stance, as illustrated in Case 35, suggests that a loss preceded by the insured’s own negligence (leaving the wallet behind) might not be considered a direct result of theft for the purpose of this cover. The policy wording often implies that the loss must be a direct consequence of the criminal act itself, not a subsequent event facilitated by the insured’s oversight. Therefore, the insurer is likely to decline the claim because the initial loss of the wallet was due to the insured leaving it behind, rather than an immediate act of theft, robbery, or burglary from their person or possession.

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 a similar effect, signifying the cessation of its legal existence and thus its capacity to act as or appoint an agent. The other options, while potentially leading to termination under specific circumstances, do not represent automatic termination due to the inherent nature of the agency relationship itself.

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 should be considered as ‘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 provided text states that a person cannot hold themselves out as a Responsible Officer or Technical Representative of an insurance agent before being registered by the IARB. This registration is confirmed by a Notice of Confirmation of Registration. Therefore, any activity or representation as such an officer before this official confirmation would be a breach of the Code and could impact the individual’s and the agent’s fitness and properness. Option (a) accurately reflects this prohibition on pre-registration representation.

The scenario describes a situation where a proposer for a 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, a fact need not be disclosed if it diminishes the risk. An automatic sprinkler system is a protective measure that reduces the likelihood and severity of fire damage, thereby diminishing the risk. Consequently, a prudent insurer would likely view this fact as reducing the risk and potentially lowering the premium, rather than influencing the decision to accept or reject the risk or solely determining the premium in a way that necessitates disclosure. Therefore, the omission of this information does not constitute a breach of the duty of utmost good faith because it diminishes the risk.

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 directly aligns with the principle of ensuring the applicant understands their role in providing accurate information and that the agent is facilitating, not dictating, the application process. Option B is incorrect because while explaining consequences of fraud is important (5/32 (b)(2)), the primary directive in this specific scenario is about the agent’s influence on the applicant’s input. Option C is incorrect as disclosing commission details is a separate requirement (5/31 (10)) and not the core principle being tested when assisting with a proposal. Option D is incorrect because while an agent must be competent (5/31 (5)), the scenario focuses on the interaction during the proposal completion, not the agent’s general knowledge base.

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 is acting for two principals. If this agent then wishes to represent another insurer for long-term business, they would be exceeding the limit of two long-term principals allowed under the general rule of a maximum of four principals, with no more than two being long-term insurers.

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 a core principle of agency law, distinguishing it from contracts that might be transferable or continue with an estate. While a principal might have appointed a second agent, this would be a breach of contract by the principal, not a termination event for the agency itself. Similarly, the expiry of a fixed term or mutual agreement are distinct termination methods.

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, and the distribution of funds will then follow the legal procedures for estate settlement, including any wills or intestacy laws.

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 ensures that the benefit is distributed according to the deceased’s will or the laws of intestacy, rather than being paid directly to the deceased themselves or remaining unclaimed.

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 specified limit. Therefore, the maximum amount the insurer will pay is HK$50,000, even though the repair cost is higher and the overall sum insured for contents is sufficient. This demonstrates the application of a single article limit, which restricts the payout for a particularly valuable item within a general policy, preventing a situation where one item’s high value disproportionately impacts the insurer’s risk without being specifically declared and underwritten.

The scenario highlights a critical regulatory requirement for individuals acting as Responsible Officers (ROs) or Technical Representatives (TRs) for insurance agents. According to the relevant guidelines, a person cannot legally hold themselves out as an RO or TR for an insurance agent until they have been officially registered by the Insurance Authority Registration Board (IARB). This registration process confirms their suitability and competence. Presenting oneself as an RO or TR before this official confirmation is considered a breach of conduct and can negatively impact the individual’s and the agent’s fitness and properness assessment, potentially leading to disciplinary actions. Therefore, the key is that the registration must be confirmed by the IARB before such a role can be assumed or advertised.

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, which was not within their mandate for household insurance. However, the insurer subsequently accepting the risk and confirming the cover is a clear act of ratification, making the contract valid from the moment it was initially made by the agent. This aligns with the principle that ratification gives retrospective authority. Option B is incorrect because while an agreement can create agency, ratification is a distinct method of establishing authority after the act has occurred. Option C is incorrect as ostensible authority arises from the principal’s conduct leading a third party to believe the agent has authority, which isn’t the primary mechanism here; the insurer’s subsequent action is key. Option D is incorrect because an agency by necessity arises in emergencies where the agent must act to protect the principal’s interests without prior authorization, which is not described in this situation.

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 reporting the failure to the IA, which can then impose further disciplinary measures on the non-compliant party. This reflects the IA’s oversight role in ensuring adherence to regulatory requirements and maintaining market integrity.

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 key exclusion here is liability for damage to property that is in the ‘care, custody, or control’ of the insured person. Hotel guests are generally considered to have the hotel’s property in their care and custody during their stay. Therefore, the insurer would likely deny coverage based on this exclusion, even though it’s accidental damage to a third party’s property.

This question tests the understanding of ‘Utmost Good Faith’ in insurance contracts, a fundamental principle. The scenario describes a situation where an applicant fails to disclose a material fact (a previous policy cancellation) that would influence the insurer’s decision. This omission, even if unintentional, violates the duty of utmost good faith. The insurer would likely have the right to void the policy from inception because the contract was based on incomplete and misleading information. Options B, C, and D describe other legal concepts or potential outcomes that are not the primary consequence of breaching the duty of utmost good faith in this specific context. Waiving the breach (C) implies the insurer chooses to overlook it, which is not the default. Vicarious liability (D) relates to responsibility for another’s actions, irrelevant here. A warranty (B) is a specific promise, and while the non-disclosure might relate to a warranty, the overarching principle breached is utmost good faith.

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 principal’s subsequent ratification of similar past actions, creates a reasonable belief in the third party that the agent possesses the authority to bind the principal. Therefore, the principal is bound by the agent’s actions under the doctrine of apparent authority.

The Insurance Ordinance (Cap. 41) governs the insurance industry in Hong Kong. Long Term Business, as defined by the Ordinance, encompasses insurance contracts that are not typically annual but extend over several years. Life insurance is the dominant category within this division, characterized by its long-term nature and significant premium volume in Hong Kong. Therefore, life insurance falls under the umbrella of Long Term Business as per the Insurance Ordinance.

Insurance primarily functions as a risk transfer mechanism, allowing individuals and businesses to shift the potential financial burden of unforeseen events to an insurer in exchange for a premium. This transfer provides financial compensation to those who suffer losses, enabling businesses to recover from major disruptions and individuals to manage financial hardship during times of need, such as illness or death. While insurance offers numerous ancillary benefits like employment generation, contribution to financial services, loss control initiatives, and facilitating economic growth by enabling investment in large projects, its core purpose is the mitigation of financial impact through risk transfer.

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 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 Insurance Agents Registration Board (IARB) requires that individuals must not act or present themselves as insurance agents for a Principal before receiving official written confirmation of their registration from the IARB. This confirmation is typically provided via a Notice of Confirmation of Registration. Acting as an agent without this formal registration can lead to legal repercussions, including potential criminal prosecution under Section 77 of the Insurance Ordinance for holding oneself out as a registered agent prematurely. Therefore, an agent must wait for this official notification before commencing any agency activities.

The Insurance Authority (IA) mandates that a Registered Person’s qualification for a passed IIQE paper becomes void if they do not engage in insurance-related work in Hong Kong for two consecutive years after passing. This rule is designed to ensure that intermediaries maintain current knowledge and competence in the insurance field. Therefore, if an individual passes the IIQE but then ceases to work in the industry for two years, they would need to retake the relevant examination papers to be considered qualified again.

The Complaints Panel applies the ‘balance of probabilities’ standard of proof in determining whether an insured person knew about 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 decision to repudiate the policy too severe, suggesting that the non-disclosure of long-past, minor ailments, especially when the insured argued forgetfulness and the conditions were symptomatic and not serious, did not meet the threshold for such a drastic action. The panel’s decision implies that the severity and recency of the undisclosed condition are crucial factors in assessing materiality and the appropriateness of repudiation, rather than a blanket assumption of knowledge for any past medical treatment.

The Insurance Authority (IA) mandates that a Registered Person’s qualification for a passed IIQE paper becomes invalid if they do not engage in insurance-related work in Hong Kong for two consecutive years after passing the examination. This rule is designed to ensure that intermediaries maintain current knowledge and practical experience in the insurance sector. Therefore, if a person passes the IIQE but then ceases to work in the industry for two years, they would need to retake the relevant papers to be considered qualified again.

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 Agents Registration Board (IARB) requires that individuals must not act or present themselves as insurance agents for a Principal before receiving official written confirmation of their registration from the IARB. This is a critical compliance requirement, and Section 77 of the Insurance Ordinance stipulates that acting as an unregistered agent is an offense. Therefore, an agent cannot solicit business or represent themselves as an agent until they have received the Notice of Confirmation of Registration.

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 through liquidation or other legal processes, unless specific legal provisions dictate otherwise. While insanity can also terminate an agency due to incapacity, death is a more definitive and universally recognized cause for the termination of a personal agency relationship.