Paper 6 Travel Insurance Agents Quiz 86

This question tests the understanding of the Personal Data (Privacy) Ordinance (PDPO) in Hong Kong, specifically concerning the obligations of a data user when engaging a data processor. Principle 2 of the PDPO mandates that personal data should be accurate, up-to-date, and retained only for as long as necessary. When a data user outsources data processing to a third party (a data processor), the data user remains responsible for ensuring compliance. This includes ensuring that the data processor does not retain the data beyond the specified purpose or period. The data user must implement contractual or other measures to enforce this. Option A correctly identifies the data user’s responsibility to ensure the data processor adheres to retention limits. Option B is incorrect because while a data processor processes data, the primary responsibility for compliance with retention periods lies with the data user who controls the data. Option C is incorrect as the PDPO does not mandate that data processors must independently obtain their own privacy certifications; the onus is on the data user to ensure the processor’s compliance. Option D is incorrect because the PDPO focuses on the necessity of retention, not on the geographical location of the data processor as the sole determinant of compliance.

This question tests the understanding of general exclusions in travel insurance policies, specifically focusing on the insured’s responsibility to act upon warnings disseminated through mass media. The scenario highlights a situation where a typhoon warning was widely broadcast. The insured’s failure to take precautions after such a warning, leading to damage to their property, would typically be excluded from coverage under the policy’s general exclusions, as per the principle that the insured must take reasonable steps to mitigate losses when aware of impending risks through public channels. Option B is incorrect because while war and nuclear risks are general exclusions, they are not directly relevant to the scenario presented. Option C is incorrect as admitting liability to a third party without consent is a claims procedure exclusion, not a general exclusion related to natural disasters. Option D is incorrect because the pro rata average clause is a concept related to underinsurance in property insurance and is generally not applied in travel insurance, nor is it a general exclusion.

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. The regulation states a maximum of four principals, with no more than two being long-term insurers. Representing a composite insurer for both types of business means the agent has already used up two of their principal slots, leaving only two more available. The scenario describes an agent representing a composite insurer for both general and long-term business, and then seeking to represent another insurer that conducts only long-term business. This would bring the total number of principals to three (two from the composite insurer and one from the new long-term insurer). Since the agent is representing the composite insurer for both types of business, they are already at their limit of two long-term principals. Therefore, they cannot represent another long-term principal.

The question tests the understanding of provisions that can lead to a payout exceeding the actual loss incurred, which deviates from the principle of indemnity. ‘New for Old’ cover means that if an insured item is damaged or destroyed, it is replaced with a new item of the same type, regardless of the age or condition of the original item. This can result in a payout greater than the depreciated value of the lost item, thus exceeding pure indemnity. Agreed value policies fix the value of the insured item at the commencement of the policy. If a total loss occurs, the insurer pays the agreed value, which might be higher than the market value at the time of the loss. Reinstatement insurance allows the insured to repair or replace the damaged property with similar property in a similar condition, often without deduction for depreciation, which can also lead to a payout exceeding the actual loss. The condition of average, conversely, is a clause designed to prevent underinsurance by ensuring that the payout is proportionate to the sum insured relative to the actual value of the property. If the property is underinsured, the claim payout is reduced proportionally, reinforcing the principle of indemnity, not exceeding it.

The question tests the understanding of the concept of ‘deemed’ or ‘treated as’ in the context of insurance and agency. The Insurance Ordinance (Cap. 41) and related codes of practice often define certain responsibilities or statuses as if they were explicitly stated, even if not written down. This is particularly relevant for duties owed by agents to principals and vice versa, where common law principles and regulatory expectations create implied obligations. Option (a) correctly identifies that these duties are often established by law or common practice, rather than solely by explicit contractual clauses. Option (b) is incorrect because while specific agreements can exist, the ‘deemed’ nature implies a broader, often statutory or common law, basis. Option (c) is incorrect as it focuses only on the principal’s perspective and ignores the agent’s duties. Option (d) is too narrow, focusing only on explicit contractual terms and overlooking the ‘deemed’ aspect.

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 injury’s accidental origin could not be sufficiently established, despite the policyholder’s occupation and the sudden braking action.

The scenario describes a patient admitted for diagnostic tests, specifically an MRI, due to proximity of a lump to a nerve. The insurer initially denied the claim, arguing the MRI could be done outpatient and hospitalization was unnecessary. However, the Complaints Panel ruled in favour of the claimant because the attending physician recommended immediate hospital admission for diagnostic tests to assess the urgency of potential surgery. This highlights that hospitalization for diagnostic purposes can be considered medically necessary if recommended by a physician to determine the need for immediate intervention, even if the tests themselves could theoretically be performed on an outpatient basis. The key factor is the physician’s judgment regarding the necessity of inpatient observation and testing in the context of potential immediate medical action.

An Insurance Agency, as defined by the Code of Conduct, is a person or entity that holds itself out to advise on or arrange insurance contracts in Hong Kong as an agent or subagent for one or more insurers. This definition encompasses various business structures, including sole proprietorships, partnerships, and corporations, all operating under the umbrella of an insurance agency. The key is the function performed – advising on or arranging insurance – rather than the specific legal form of the business. Therefore, a business entity structured as a corporation that engages in these activities would be classified as an Insurance Agency.

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 doctor’s report indicated short-lived, non-serious conditions, did not meet the threshold for repudiation. The panel awarded the hospital cash benefit, indicating that the insured’s argument about the minor nature and long duration since the ailments were symptomatic was persuasive enough to tip the balance against the insurer’s claim of material non-disclosure.

The Personal Data (Privacy) Ordinance (PDPO) allows for flexibility when a data user cannot establish a contractual agreement with a data processor. In such situations, the Ordinance permits the use of ‘other means’ to ensure compliance with data protection requirements. These ‘other means’ are not explicitly defined but generally refer to non-contractual oversight and auditing mechanisms that a data user can implement to monitor the data processor’s adherence to data protection principles. This approach acknowledges that direct contractual enforcement might not always be feasible, but the responsibility for data protection remains with the data user.

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.

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 commercial property and is often specified as a basis of settlement; 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 might still be based on actual loss; and marine policies, while often valued, have specific rules for both partial and total loss claims that differ from general ‘New for Old’ principles.

The Insurance Ordinance (Cap. 41) governs the insurance industry in Hong Kong. The question tests the understanding of the fundamental principle of utmost good faith, which is a cornerstone of insurance contracts. Non-fraudulent non-disclosure occurs when a party negligently or innocently fails to reveal material facts that would influence a prudent underwriter’s decision. This is distinct from non-fraudulent misrepresentation (providing inaccurate information) and ordinary good faith (the duty not to lie or deliberately mislead, typically in response to direct questions). While all relate to good faith, non-disclosure specifically addresses the omission of relevant information.

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’s clients. Option (c) is incorrect as it misstates the restriction; the prohibition applies when advice is provided, not simply by being associated with both. Option (d) is incorrect because it suggests a blanket prohibition on any association, which is not the case; the restriction is conditional on the provision of advice.

This question tests the understanding of how different types of risks are categorized and their implications for insurability. Pure risks, by definition, only present the possibility of loss or no change, making them the primary focus for commercial insurers. Speculative risks, which involve the potential for both gain and loss, are generally not insurable because the voluntary pursuit of gain would undermine the principle of indemnity and create moral hazard. Fundamental risks, affecting large populations and often beyond individual control, are also typically uninsurable due to the immense financial exposure they represent for insurers. Particular risks, affecting individuals or small groups, are the most common type insured. Therefore, a risk that offers the potential for financial gain alongside the possibility of loss is classified as speculative and generally excluded from standard insurance coverage.

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 reason for the claimed delay (aircraft rotation) was not listed as an insured peril in the policy. Therefore, the insurer correctly rejected the claim because the cause of the delay did not fall under the defined covered events, highlighting that travel delay coverage is usually on a named perils basis, not an all-risks basis.

This question tests the understanding of subrogation within the context of indemnity. 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. This principle is fundamental to the concept of indemnity, which aims to restore the insured to their pre-loss financial position without allowing for profit. In the scenario provided, the insured suffers a loss due to a third party’s negligence. If the insurer pays the claim, they can then seek reimbursement from the negligent party. This is a classic application of subrogation. Option (b) is incorrect because while the insurer pays the claim, subrogation is about recovering that payment from a third party, not simply paying the claim. Option (c) is incorrect as subrogation is a right that arises after payment, not a condition for the initial policy arrangement. Option (d) is incorrect because subrogation is a legal principle that applies to indemnity contracts, regardless of specific policy wording, and it’s about recovering from a responsible third party, not the insured’s own actions.

This question tests the understanding of how different types of risks are typically handled by commercial insurers. Pure risks, by definition, only present the possibility of loss or no change, making them insurable because the potential for gain is absent, thus aligning with the principle of indemnity. Speculative risks, however, involve the possibility of both gain and loss. Insuring speculative risks would undermine the principle of indemnity and could incentivize reckless behavior, as the insured might profit from the very event they are insured against. Fundamental risks, affecting large populations, are generally considered uninsurable by commercial insurers due to the immense financial exposure and the difficulty in accurately pricing such widespread perils. Particular risks, affecting individuals or small groups, are the primary focus of commercial insurance. Therefore, the statement that commercial insurers primarily insure pure risks and particular risks is accurate.

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 avenues for redress. This asymmetry in the appeal process is a significant feature of the ICCB’s dispute resolution mechanism.

The question tests the understanding of the insurer’s responsibility regarding the accuracy of information provided by their employees, as outlined in the administration section of the IIQE syllabus. Specifically, it refers to the principle that customers should not suffer due to errors made by the insurer’s staff. Option A correctly reflects this principle by stating that the insurer is responsible for rectifying errors made by its employees. Option B is incorrect because while insurers must ensure agents comply with the law, this question focuses on the insurer’s direct responsibility for employee actions impacting customers. Option C is incorrect as the syllabus emphasizes clear communication and explanation of policy terms, not the exclusion of liability for employee errors. Option D is incorrect because while prompt claim handling is crucial, it doesn’t directly address the insurer’s liability for employee inaccuracies in other administrative processes.

The HKFI’s ‘Guidelines on Complaint Handling’ emphasize a structured approach to managing customer grievances. A core principle is ensuring that the investigation process is impartial and avoids conflicts of interest. This means that an employee directly involved in the situation that led to the complaint should not be the one investigating it. This separation ensures objectivity and fairness in the review process, which is crucial for maintaining customer trust and adhering to regulatory expectations for complaint resolution.

The Personal Data (Privacy) Ordinance (PDPO) in Hong Kong is designed to protect the privacy of individuals by regulating the collection, holding, processing, and use of personal data. Its scope is broad and encompasses both the public sector and the private sector. This means that government departments, statutory bodies, as well as companies and individuals in the private sector, are all subject to the provisions of the PDPO when they handle personal data. Therefore, the Ordinance applies to both sectors.

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.

Principle 3 of the Personal Data (Privacy) Ordinance (PDPO) mandates that personal data should only be used for the purposes for which it was collected, or a directly related purpose, unless the data subject provides consent. In this scenario, an insurance company wishes to use customer data collected for policy administration to market unrelated financial products. This constitutes a new purpose for which explicit consent from the data subjects is required. Without such consent, using the data for marketing unrelated products would be a breach of Principle 3. Option B is incorrect because while Principle 4 addresses data security, it doesn’t permit unauthorized use. Option C is incorrect as Principle 5 relates to transparency about data usage, not the permissible uses themselves. Option D is incorrect because Principle 6 concerns access and correction rights, not the purpose limitation of data usage.

The question tests the understanding of underwriting practices in travel insurance, specifically concerning single trip policies versus annual policies. The provided text explicitly states that single trip risks are not individually underwritten, meaning the insurer does not typically inquire about the insured’s medical history for these policies. This contrasts with annual policies, where such inquiries are common. Therefore, a travel insurance policy that does not ask for detailed medical history for a specific trip is consistent with the underwriting approach for single trip risks.

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.

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 could be mistaken for an acute issue. The insurer’s responsibility is to assess the root cause of the medical condition based on available information, and if it’s linked to an exclusion, they are justified in denying coverage.

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 a certain timeframe after the insurer has issued its final decision. This timeframe is crucial for ensuring that disputes are addressed promptly and that evidence remains relevant. The ICCB’s terms of reference stipulate that the complaint must be filed within six months from the date of notification of the insurer’s final decision. Therefore, a complaint filed seven months after receiving the final decision would fall outside the ICCB’s jurisdiction.

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 suggests the agent should ensure all information is accurate, which is important but secondary to the agent’s primary duty of not influencing the applicant and clarifying responsibility. Option C implies the agent should pre-fill information, which is a direct violation of the non-influence rule. Option D suggests the agent should only ask questions that are easy to answer, which is irrelevant to the core principle of applicant responsibility and avoiding influence.

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 Insurance Ordinance, is the ability to impose restrictions on an insurer’s investments. This can involve limiting the types of assets the insurer can hold or specifying where those assets can be located. This power is a crucial tool for ensuring the financial stability and solvency of an insurer, thereby safeguarding the interests of the insuring public. Limiting premium income is another intervention, but it relates to the volume of new business, not the management of existing assets. Requiring custody of assets by a trustee is a security measure, and a special actuarial investigation is a diagnostic tool, not a direct intervention on operations.