Paper 6 Travel Insurance Agents Quiz 85

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. Options B, C, and D present scenarios that contradict this principle of finality, suggesting further review or different avenues of appeal which are not supported by the regulations.

The question tests the understanding of the insurer’s responsibility regarding the proposal form, specifically in situations where a proposal form was not obtained. According to the provided syllabus, a denial of claims should not happen unreasonably, particularly with non-disclosure of material facts and especially where no proposal form was obtained. This implies that the absence of a proposal form strengthens the policyholder’s position against an unreasonable claim denial based on non-disclosure. Therefore, an insurer denying a claim due to non-disclosure when no proposal form was obtained would be acting unreasonably.

The scenario describes a situation where an applicant for a commercial 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, facts that diminish the risk do not need to be disclosed in the absence of an inquiry. An automatic sprinkler system is a protective measure that would likely lead an insurer to set a lower premium, thus indicating a reduced risk. Therefore, its non-disclosure, in this context, does not constitute a breach of the duty of utmost good faith. The other options represent situations that would typically require disclosure: a fact that influences the decision to accept or reject a risk, a fact that influences the premium calculation (even if it reduces it, the insurer has a right to know for accurate underwriting), and a fact that is known to the insurer but is not a matter of common knowledge or already possessed by the insurer.

This question tests the understanding of the principle of ‘Utmost Good Faith’ (最高誠信) in insurance contracts. This principle mandates that both parties, the insurer and the insured, must disclose all material facts relevant to the risk being insured. A failure to do so, even if unintentional, can render the contract voidable. In this scenario, the applicant’s omission of a previous claim, which is a material fact, constitutes a breach of this duty. The insurer’s right to void the policy stems directly from this breach of utmost good faith, not from the concept of negligence (tort), vicarious liability, or the insurer waiving a breach.

The question tests the understanding of an insurance agent’s professional conduct as stipulated by regulations for general insurance and restricted scope travel business. All four listed points are fundamental ethical and professional obligations for an insurance agent. An agent must only provide advice within their area of expertise (i). Identifying oneself before engaging in business discussions is crucial for transparency and compliance (ii). When comparing policies, it is essential to clearly articulate the differences to avoid misleading the client (iii). Finally, ensuring the client comprehends the policy’s coverage and what they are purchasing is a core duty to prevent misrepresentation and ensure informed consent (iv). Therefore, all four statements represent required conduct.

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 engaged in general business that also handles statutory insurance business, thus triggering the higher minimum requirement.

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 fundamentally linked to indemnity because it prevents the insured from profiting from their loss by receiving compensation from both the insurer and the responsible third party. In the context of life insurance, the payout is not based on indemnity for a financial loss, but rather on the occurrence of a specific event (death) and the sum assured. Therefore, the insurer does not acquire subrogation rights against a negligent third party in life insurance, as the payment is not intended to indemnify a quantifiable financial loss that could be recovered elsewhere. This aligns with the principle that subrogation is a consequence of indemnity, and where indemnity does not apply, subrogation rights do not arise.

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 agency contract, where the skills, trust, and capabilities of the individuals involved are paramount. If either party ceases to exist as a legal or natural person, the basis of the agreement is fundamentally altered, leading to its termination. This is distinct from situations where a company might continue its operations through a successor entity, but the direct agency contract with the deceased individual or dissolved entity would end.

This question tests the understanding of the principle of subrogation in insurance, which allows an insurer to step into the shoes of the insured to recover losses from a responsible third party after paying a claim. The scenario describes a situation where a fire was caused by a faulty appliance from a manufacturer. After the insurance company indemnifies the policyholder for the damage, the insurer gains the right to pursue the manufacturer for the losses incurred, as per the principle of subrogation. Option B is incorrect because the policyholder retains the right to claim against the manufacturer for any losses not covered by the insurance. Option C is incorrect as the insurer’s right to subrogation arises after payment of the claim, not before. Option D is incorrect because while the policyholder has a duty of utmost good faith, subrogation is a right of the insurer to recover from a third party, not a duty owed to the third party.

The question tests the understanding of the breakdown of authorized insurers in Hong Kong as of December 31, 2013, as presented in the provided text. The text specifies that there were 19 composite insurers, which are those carrying on both long-term and general business. The remaining insurers were categorized as ‘pure’ long-term or ‘pure’ general business. Therefore, the number of insurers that were not composite insurers is the total number of authorized insurers minus the number of composite insurers. Based on the provided data, there were 44 pure long-term insurers and 92 pure general insurers. Adding these to the 19 composite insurers gives a total of 155 authorized insurers. The number of non-composite insurers is therefore 44 + 92 = 136.

This question tests the understanding of the restrictions on individuals holding multiple roles within the insurance intermediary sector, specifically concerning directors of insurance agents and brokers. According to the provided text, a proprietor or employee of an insurance broker who provides insurance advice to a policyholder or potential policyholder cannot simultaneously be a proprietor or employee of, or partner in, an insurance agent. This restriction is designed to prevent conflicts of interest and ensure clarity in advisory roles. Option (a) correctly identifies this prohibition. Option (b) is incorrect because while a proprietor of an insurance broker can be a director of an insurance agent, this is only permissible if they do not provide insurance advice to policyholders of the insurance agent. Option (c) is incorrect as it describes a scenario that is permissible under certain conditions (i.e., not providing advice to the other entity’s policyholders), but the question asks about a situation where advice is provided to both. Option (d) is incorrect because it misrepresents the relationship between a proprietor of an insurance agent and an insurance broker; the restriction is on a proprietor of an insurance broker being involved with an insurance agent in a way that involves providing advice to the agent’s clients.

This question tests the understanding of the principle of subrogation in insurance, which allows an insurer to step into the shoes of the insured to recover losses from a responsible third party after paying a claim. The scenario describes a situation where a third party’s negligence caused damage to a policyholder’s property, and the insurer has indemnified the policyholder. According to the principle of subrogation, the insurer gains the right to pursue the negligent third party for the amount paid. Option (a) correctly identifies this right. Option (b) is incorrect because while the policyholder has a right to claim from the insurer, subrogation is the insurer’s right against the third party. Option (c) is incorrect as the insurer’s right arises after payment, not before, and it’s about recovering from the responsible party, not the policyholder. Option (d) is incorrect because the insurer’s right is to recover the amount paid, not to claim the full value of the property if it exceeds the claim amount, and it’s against the third party, not the policyholder.

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 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 outside this timeframe, the ICCB cannot consider it, regardless of whether the insurer is a member or the policy type. Therefore, a complaint filed seven months after the final decision notification would be outside the ICCB’s jurisdiction.

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 preventing travel, is not usually listed as a ‘named peril’ in standard trip cancellation policies. Therefore, the insurer’s rejection of the claim is justified because the cause of cancellation (government ban) does not fall under the specified insured events such as serious illness of the insured or their travel companion, or damage to their home. The other options represent situations that might be covered under specific named perils or are incorrect interpretations of the policy’s scope.

The core of this question lies in interpreting the definition of ‘Accident’ as provided in the Personal Accident policy, which requires the cause to be ‘violent, external and visible means’. The medical experts’ opinion, supported by the attending physicians, concluded that the intracerebral haemorrhage was spontaneous and related to primary hypertension, not caused by external means. The location of the haemorrhage (confined to the right thalamus without signs in the meningeal areas) further supported the conclusion that it was not a result of the fall. Therefore, the insurer’s repudiation was based on the lack of an ‘Accident’ as defined by the policy terms, as the death was attributed to an illness rather than a violent, external, and visible cause stemming from the fall.

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. The other options describe actions that are either outside the IARB’s direct registration mandate (like issuing licenses directly to insurers) or are consequences of registration rather than the act of registration itself (like investigating complaints or confirming appointments).

The scenario describes a situation where a flight departed on time, but the insured submitted a claim for a travel delay. The policy’s coverage for travel delay is typically based on specific, named perils. In this case, the cause of the delay (aircraft rotation) was not listed as an insured peril in the policy. Therefore, the insurer correctly rejected the claim because the event triggering the delay was not a covered cause of loss under the terms of the travel delay benefit. It’s crucial to differentiate between departure and arrival delays, as policies may not cover both, and the specific perils listed for delay coverage are paramount.

The question tests the understanding of the breakdown of authorized insurers in Hong Kong as of December 31, 2013, as presented in the provided text. The text specifies that there were 19 composite insurers, which are those carrying on both long-term and general business. Of these, 10 were Hong Kong incorporated companies and 9 were from other jurisdictions. Therefore, the total number of composite insurers was 19.

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 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 Baggage Delay section of a travel insurance policy typically covers expenses incurred due to the temporary loss of baggage for a specified minimum period after arrival at the destination. This period, known as a time franchise, must be met before benefits are payable. The policy wording specifies that the delay must be caused by the common carrier. In this scenario, the delay was caused by the hotel’s misdirection, not the airline (common carrier). Therefore, the delay caused by the hotel would not be covered under the Baggage Delay section, as it falls outside the scope of the insured peril.

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 is 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 more formal approach where an entity sets aside funds to cover potential losses. Risk transfer, other than insurance, could involve contractual agreements like indemnities or guarantees. Therefore, a comprehensive risk financing program encompasses a range of methods to manage the financial fallout from adverse events, not solely relying on insurance.

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 has not been expressly granted such authority. In the scenario, the insurer (principal) has consistently issued policies for cargo risks to West Africa, despite explicitly forbidding the underwriting agent from accepting such risks. This pattern of conduct, where the principal ratifies the agent’s unauthorized actions by issuing policies, creates a reasonable belief in the client that the agent possesses the authority to grant temporary cover for these risks. Therefore, the insurer would be bound by the agent’s future actions in this regard due to apparent authority. Option B is incorrect because while agency by estoppel also involves representations, it typically applies when there is no actual agency relationship, and the principal is estopped from denying it. Here, an agency relationship exists, but the scope of authority is in question. Option C is incorrect as authority of necessity arises in urgent situations to protect the principal’s interests when communication is impossible, which is not the case here. Option D is incorrect because the agent’s duty of obedience requires following lawful instructions; however, apparent authority can bind the principal even when the agent disobeys, due to the principal’s own conduct.

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 that authority was not expressly granted. In the 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, where the principal ratified the agent’s unauthorized actions by issuing policies, creates a manifestation to the client (third party) that the agent possesses the authority to grant temporary cover for these risks. Therefore, the insurer would be bound by the agent’s future acceptance of similar risks due to apparent authority, as the client’s belief is reasonably formed based on the principal’s past conduct. Option B is incorrect because while the agent acted against express instructions, the principal’s subsequent actions (issuing policies) created the appearance of authority. Option C is incorrect as agency of necessity applies 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 to a third party, but apparent authority is a more direct consequence of the principal’s manifestations that lead to a reasonable belief in the agent’s authority, even if no direct representation was made by the principal to the third party. The distinction is subtle but important: apparent authority focuses on the principal’s manifestations, while estoppel focuses on the principal’s conduct that leads the third party to believe the agent has authority.

This question tests the understanding of the definition of ‘loss of limb’ under a personal accident policy, specifically focusing on the distinction between physical separation and permanent loss of use. The scenario describes a situation where the insured’s hand is severely damaged but not physically severed. The key is that the permanent inability to use the hand for its normal functions, even without amputation, constitutes a ‘loss of limb’ as per the policy definition. Option B is incorrect because it implies that only physical severance qualifies. Option C is incorrect as it focuses on the ability to perform *any* work, which is not the primary definition of loss of limb. Option D is incorrect because it introduces a time frame for recovery that is not part of the definition of loss of limb itself, but rather a potential factor in determining the permanence of the loss of use.

The Insurance Agents Registration Board (IARB) is responsible for assessing the compliance of Registered Persons (RPs) with Continuing Professional Development (CPD) requirements. According to the relevant guidance, an RP registered to engage in the sale of specified investment products (RSTB) who has fulfilled all CPD hours for an assessment year within that year is considered qualified to maintain their registration for an additional 12 months, provided they also meet other fitness and properness criteria. This ensures that RPs remain knowledgeable and competent in their field, particularly concerning investment products.

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 adverse effects of future losses.

The core of this question lies in interpreting the definition of ‘Accident’ as provided in the Personal Accident policy, which requires the cause to be ‘violent, external and visible means’. The medical experts’ opinion, supported by the attending physicians, concluded that the intracerebral haemorrhage was spontaneous and related to primary hypertension, not a consequence of the fall. The location of the haemorrhage (confined to the right thalamus without involvement of areas typically affected by external trauma) was crucial in determining that it was not caused by external means. Therefore, the insurer’s repudiation of liability based on the death not being an ‘Accident’ as defined is justified.

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 decline 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.