Paper 6 Travel Insurance Agents Quiz 74

The Insurance Authority (IA) has the power to intervene in an insurer’s operations to protect policyholders. One such intervention, as outlined in the provided text, is the limitation of premium income. This measure is typically employed when the IA believes an insurer is expanding too rapidly, which could lead to an inability to manage the associated liabilities effectively. The other options, while potentially related to regulatory actions, are not the primary or direct intervention described for managing rapid growth and potential liability issues.

The question tests the understanding of ‘Deemed’ or ‘Treated as’ responsibilities in the context of agency. The Insurance Ordinance (Cap. 41) and related codes of practice often stipulate certain duties and responsibilities that are considered to apply to registered persons and intermediaries, even if not explicitly stated in every contract. These ‘deemed’ duties are crucial for maintaining regulatory standards and ensuring fair practices. Option A correctly identifies that these are responsibilities that are considered to apply by law or regulation, regardless of explicit contractual mention. Option B is incorrect because while specific duties can be individually specified, the concept of ‘deemed’ implies a broader, legally imposed obligation. Option C is incorrect as ‘fair discrimination’ relates to justified differential treatment in insurance pricing, not to the nature of agency duties. Option D is incorrect because ‘fidelity guarantee’ is a type of insurance that protects against dishonesty, not a description of agency responsibilities.

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.

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 has not themselves organized. 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 such a policy would fall 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. While accuracy and retention (Principle 2) are crucial, and data processors have specific obligations, the core requirement for informing the data subject at the point of collection falls under Principle 1.

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 more than six months after the notification of the final decision, the ICCB cannot consider the case, regardless of whether the insurer is a member or the policy type. Therefore, the insurer has acted fairly in rejecting the complaint based on the timeliness of its submission.

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 is 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 conducting general business and also statutory insurance business, thus triggering the higher minimum requirement.

An agency agreement is a personal contract. The death of either the principal or the agent fundamentally alters the capacity of the parties to fulfill their obligations. Consequently, the agency relationship is automatically terminated upon the death of either party, irrespective of any contractual terms specifying a notice period or compensation for early termination. This is a core principle of agency law, distinguishing it from other types of commercial contracts where the death of a party might not automatically dissolve the agreement.

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.

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, deals with group retirement 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 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 financial obligations like debenture repayment, and is not linked to human life events.

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 a policyholder must have a financial stake in the subject matter of the insurance. For property insurance, this interest must exist at the time of the loss. For life insurance, it generally needs to exist at the inception of the policy. The scenario describes a situation where a person is insuring a property they do not own, which would typically mean they lack insurable interest at the time of the loss, making the policy voidable. The other options describe situations where insurable interest might be present or are irrelevant to the core principle.

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 this information is available for public viewing.

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, recognizing the personal trust and responsibility inherent in such relationships. While a principal might have provisions for their estate to handle ongoing matters, the agency relationship itself, as originally constituted, ceases upon death. Similarly, the insolvency or liquidation of a corporate party has the same effect as death for an individual, as it signifies the cessation of the entity’s legal existence and ability to contract.

The Insurance Agents Registration Board (IARB) is the body established by the Hong Kong Federation of Insurers (HKFI) to oversee the registration of insurance agents and to manage complaints against them, as stipulated in the Code of Practice for the Administration of Insurance Agents. Holding oneself out as an agent before official registration is an offense under the Insurance Ordinance and a breach of the aforementioned Code of Practice. Therefore, the IARB’s guidelines on the effective date of registration are crucial for ensuring compliance and preventing unauthorized practice.

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.

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 explicitly states that there were 19 composite insurers, which are those carrying on both long-term and general business. The breakdown of these 19 composite insurers into Hong Kong incorporated and other entities is also provided, but the total number of composite insurers is the key figure here. Options B, C, and D represent incorrect totals for different categories of insurers or a misinterpretation of the composite category.

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. Therefore, the insurer is correct in limiting the reimbursement to the economy class fare.

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 a policyholder must have a financial stake in the subject matter of the insurance. For property insurance, this interest must exist at the time of the loss. For life insurance, it generally needs to exist at the inception of the policy. The scenario describes a situation where a person is insuring a property they do not own, which directly relates to the timing of insurable interest. Option A correctly identifies that for property insurance, the interest must be present at the time of the loss. Option B is incorrect because while insurable interest is crucial, its timing varies by insurance type. Option C is incorrect as it misstates the requirement for life insurance. Option D is incorrect because it suggests insurable interest is always required at both inception and loss, which is not universally true.

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 facilitate. Therefore, a travel insurance agent cannot sell a policy that covers a specific valuable item like a precious watch with an ‘all risks’ coverage, even if it’s related to a trip the agent arranged, because such a policy is not considered ‘travel insurance’ under the restricted definition and falls outside their permitted scope of business. The scenario describes a situation where a client wants a specific, high-value item covered with an ‘all risks’ policy, which goes beyond the standard coverage typically found in a package travel insurance policy and is not within the permitted business scope of a travel insurance agent.

This question tests the understanding of general exclusions in travel insurance policies, specifically focusing on the insured’s responsibility to act upon public warnings. Clause (c)(v) of the provided text states that a general exclusion includes the insured’s failure to take precautions following warning through mass media of intended strikes, riots, civil commotion, natural disasters, or epidemics. Therefore, if an insured person ignores a widely publicized warning about an impending natural disaster and subsequently suffers losses due to it, the insurer may deny the claim based on this exclusion.

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 security and stability, enabling individuals to cope with losses and businesses to continue operations after significant adverse events. While insurance offers various ancillary benefits like employment generation and loss control, its core purpose is to mitigate the financial impact of risk.

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’s generally required at the inception of the policy, its necessity can vary depending on the type of insurance and the specific circumstances. For instance, in life insurance, the insurable interest must exist at the time the policy is taken out, but not necessarily at the time of death. In property insurance, it typically needs to exist at the time of loss. The question probes this nuance by presenting a scenario where an agent is advising a client on a property insurance policy. The correct answer highlights that insurable interest is crucial at the point of loss for property insurance, reflecting the principle that the insured must suffer a financial detriment if the insured event occurs.

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, as it could not function independently of the camera and was essential for its operation. Therefore, the HK$3,000 article limit applied to the combined value of the camera and the memory card, not to each item individually. Case 31 further clarifies this by distinguishing an accessory from an independent item like a flash unit that can function separately. The fact that the items were purchased under different invoices is irrelevant to the policy’s definition of a ‘set’.

The Insurance Authority (IA) has the power to intervene in an insurer’s operations to protect policyholders. One such intervention, as outlined in the provided text, is the limitation of premium income. This measure is typically employed when the IA believes an insurer is experiencing excessively rapid growth, which could lead to an inability to manage the associated liabilities effectively. The other options represent different types of regulatory actions: restricting investments relates to asset management, requiring custody of assets by a trustee is an additional security measure, and a special actuarial investigation is a diagnostic tool used when concerns arise about an insurer’s ability to meet its obligations.

The Hong Kong Federation of Insurers (HKFI) plays a crucial role in the self-regulatory framework of the insurance industry in Hong Kong. A key function of the HKFI is the establishment and operation of the Insurance Agents Registration Board (IARB). The IARB is responsible for maintaining the register of insurance agents and their associated Responsible Officers and Technical Representatives. Furthermore, it handles complaints lodged against these registered individuals, operating under the guidelines set forth in the Code of Practice for the Administration of Insurance Agents. This dual responsibility of registration and complaint handling underscores the HKFI’s commitment to upholding professional standards and consumer protection within the insurance sector.

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 ultimately water damage. The key concept is that even if the initial cause is uninsured, if the loss is directly and naturally caused by a sequence of events where one of the later events is an insured peril, the loss can be recoverable. In this case, the water damage is the direct result of leaks caused by the explosion, which itself was a natural consequence of the fire, which followed the collision caused by negligence. The illustration in the provided text explicitly states that for each policy, the water damage is regarded as a result of its sole insured peril, notwithstanding that this peril can be traced backward to an uninsured peril. Therefore, the cargo damage by water is recoverable under the policy covering ‘entry of water’ because the chain of events, though initiated by negligence, leads to the insured peril of water entry.

The question tests the understanding of the finality of decisions made by the Appeals Tribunal as stipulated in the Code. According to the provided text, the Appeals Tribunal’s decisions are final, meaning they cannot be further appealed through the same established process. This finality is a key characteristic of appellate bodies designed to bring closure to disputes. The other options are incorrect because they describe circumstances that might lead to an appeal or the process of applying for a stay, not the ultimate outcome of an appeal.

The Insurance Authority (IA) has the power to intervene in an insurer’s operations to protect policyholders. One of the measures available to the IA, as outlined in the regulatory framework, is the ability to impose restrictions on an insurer’s investment activities. This can include dictating the types of assets the insurer can invest in or the geographical locations where investments can be made. This power is a crucial tool for ensuring the financial stability of the insurer and safeguarding the interests of the insuring public, especially when the insurer’s financial health is a concern or when its investment strategy poses potential risks. The other options, while also regulatory powers, are distinct interventions: limiting premium income addresses growth and potential liability issues, restricting new business directly impacts the volume of contracts, and requiring custody of assets by a trustee is a measure for additional security of existing assets.

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 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 for insurance intermediaries.

The question tests the understanding of the insurer’s responsibility regarding the clarity and fairness of proposal forms, a key aspect of the formation of an insurance contract. According to the provided syllabus, proposal forms should be in understandable language with clear guidance, carefully explain utmost good faith, ask clear questions about material facts, and explain the importance of associated questionnaires. Option A correctly reflects these requirements by emphasizing the need for clear, understandable language and explicit questions about material facts. Option B is incorrect because while insurers should ensure agents act fairly, the primary responsibility for the proposal form’s content lies with the insurer. Option C is incorrect as it focuses on the policy document, which is issued after the proposal, and not the proposal form itself. Option D is incorrect because while insurers should not limit their liability for agents’ actions, the question specifically pertains to the content and clarity of the proposal form, not the agent’s conduct in general.