Paper 6 Travel Insurance Agents Quiz 89

The Insurance Authority (IA) possesses a range of statutory powers to intervene in the operations of authorized insurers when necessary. These powers are designed to protect policyholders and maintain the stability of the insurance market. The options provided represent different levels of intervention. Liquidation is the most severe action, involving the winding up of the company. Restrictions on business activities, such as limiting the types of policies an insurer can underwrite or prohibiting new business, are less severe but still significant interventions. Appointing a statutory manager is a measure where the IA takes direct control of the insurer’s management to rectify issues. Therefore, the ability to impose restrictions on an insurer’s business activities is a key intervention power granted to the IA under relevant Hong Kong insurance legislation, such as the Insurance Companies Ordinance (Cap. 41).

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 proposal for a single trip that omits medical history details, even if not explicitly asked for on the form, is generally acceptable from an underwriting perspective for that specific type of policy, as the insurer has not requested this information for that risk type. The legal duty to disclose material facts still exists, but the underwriting practice for single trips is to not solicit this information, implying a different risk assessment approach compared to annual 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 did not organize. 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 watch is intended for travel, because such a policy would fall outside the defined ‘travel insurance’ and ‘Restricted Scope Travel Business’.

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 is proposing 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 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 potentially lead to difficulties in managing the associated liabilities. The other options, while representing potential regulatory actions, are not the specific intervention described as a limitation on premium income.

This question tests the understanding of apparent authority, a key concept in agency law relevant to the IIQE syllabus. Apparent authority arises when a principal’s actions lead a third party to reasonably believe that an agent has the authority to act on the principal’s behalf, even if the agent lacks actual authority. In this scenario, the insurer (principal) consistently issued policies for cargo risks to West Africa, despite explicitly forbidding the underwriting agent from accepting such risks. This pattern of conduct, where the principal ratified the agent’s unauthorized actions by issuing policies, creates a reasonable belief in the client that the agent possessed 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, as the client’s reliance on the principal’s past conduct is justified. Option B is incorrect because agency by estoppel requires a representation by the principal that the agent has authority, which is not the primary basis here; the insurer’s actions (issuing policies) directly create the appearance of authority. Option C is incorrect as authority of necessity applies in urgent situations where communication is impossible, which is not indicated in the scenario. Option D is incorrect because while an agent owes duties like obedience and loyalty, the question focuses on the principal’s liability to a third party due to the agent’s actions, not the agent’s internal duties.

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 enhance customer satisfaction by providing a more generous payout than strict indemnity would allow. 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 doctrine of contribution applies when there is double insurance, allowing insurers to share the loss.

The question tests the understanding of the fundamental nature of a contract as a legally enforceable agreement. While many agreements exist in daily life, not all are intended to create legal obligations. Social arrangements, like a lunch appointment, are typically not considered contracts because the parties do not intend to be legally bound by them. If one party cancels, the other cannot sue for breach of contract. This distinguishes legally binding contracts from informal social arrangements, highlighting the element of legal enforceability as the key differentiator.

The scenario describes a situation where an insured person was hospitalized for rehabilitation after an injury. Travel insurance policies, similar to medical insurance, often have specific exclusions for hospital confinement. Case 23 highlights that confinement for rehabilitation purposes is typically not covered under the hospital benefit section, even if recommended by a doctor. The insurer correctly denied the claim because the policy definition of ‘Hospital Confinement’ excluded rehabilitation facilities, and the Complaints Panel upheld this decision based on the discharge summary confirming the purpose of the stay was rehabilitation.

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 obligation to protect personal data remains.

The question tests the understanding of how certain insurance policy provisions can lead to a payout exceeding the actual loss incurred by the insured, moving beyond pure 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 often results in a payout greater than the depreciated value of the lost item, thus exceeding strict indemnity. Agreed value policies fix the value of the insured item at the commencement of the policy. If the item is a total loss, the insurer pays the agreed value, which might be higher than the market value at the time of the loss, again going beyond simple indemnity. Reinstatement insurance allows the insurer to repair or replace the damaged property to its condition immediately before the loss occurred, often using new materials. This can also result in a payout exceeding the indemnity principle if the cost of new materials is higher than the depreciated value of the original item. The condition of average, conversely, is a principle 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 payout will be less than the loss, reinforcing the indemnity principle, not exceeding it.

This question tests the understanding of the specific definition of ‘loss of limb’ as per the IIQE syllabus, which includes physical separation at or above the wrist or ankle, or a permanent loss of use of the limb. Option B is incorrect because while a severe fracture might cause significant pain and limit function, it does not automatically equate to a permanent loss of use of the limb unless that loss of use is irrecoverable and prevents any gainful occupation. Option C is incorrect as a temporary inability to perform duties, even if prolonged, does not meet the ‘permanent’ criterion for loss of use. Option D is incorrect because the definition specifically refers to the wrist or ankle as the point of separation, not the elbow or knee.

This question tests the understanding of general exclusions in travel insurance policies, specifically focusing on the insured’s responsibility to take precautions. Clause (c)(v) of the provided text states that a general exclusion includes the insured’s failure to take precautions following warning through general mass media of intended strike, riot, civil commotion, natural disasters, or epidemic. 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. Option (b) is incorrect because while failure to safeguard property is an exclusion, it’s not specifically tied to mass media warnings in that phrasing. Option (c) is incorrect as it refers to admitting liability to a third party, which is a different type of exclusion related to claims procedure. Option (d) is incorrect because it relates to the pro rata average clause, which is generally not found in travel insurance for property loss.

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 public and private sector organizations that handle personal data. Therefore, it applies to entities in both sectors, not exclusively to one or the other, nor to neither.

The scenario describes a situation where an insured person was hospitalized for rehabilitation after an injury. Travel insurance policies, similar to medical insurance, often have specific exclusions for hospital confinement. Case 23 highlights that confinement solely for rehabilitation purposes is typically not covered under the hospital benefit section, even if recommended by a doctor. The insurer’s refusal to pay for the rehabilitation period aligns with this exclusion, as the primary purpose of the stay was rehabilitation, not acute medical treatment for the initial injury.

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, it’s typically required at inception, but not necessarily at the time of a claim if the policy has been assigned. In property insurance, it’s usually required at both inception and at the time of loss. The question probes this nuance by presenting a scenario where an agent is advising a client on a policy. The correct answer highlights that insurable interest is a prerequisite for a valid contract, but its continuous existence is not always mandated throughout the policy’s term, depending on the policy type and assignment. The other options present common misconceptions or incomplete understandings of the principle.

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.

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 insurer rejected the claim because the cause of the delay (aircraft rotation) was not listed as an insured peril in the policy. This highlights that travel delay coverage is usually on a ‘named perils’ basis, meaning only the explicitly listed causes of delay are covered, rather than an ‘all risks’ basis where all causes are covered unless specifically excluded. Therefore, the insurer’s rejection is valid if aircraft rotation is not a covered peril.

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 subsequent discovery of this omission allows them to repudiate the contract. Option B is incorrect because while a warranty is a strict undertaking, the core issue here is the breach of the duty of utmost good faith in disclosure. Option C is incorrect as vicarious liability (轉承責任) relates to liability for the actions of another, which is not directly applicable here. Option D is incorrect because an uninsured peril (不保危險) refers to a cause of loss not covered by the policy, which is distinct from the duty of disclosure.

This question tests the understanding of the ‘period of free look’ in insurance contracts, a mandatory provision under Hong Kong insurance regulations. The period allows policyholders to review the policy documents and decide if they wish to proceed. If they cancel within this period, they are entitled to a full refund of any premiums paid, minus any administrative expenses that are explicitly stated and permitted by law. This provision is designed to protect consumers by ensuring they have adequate time to understand their commitments before being bound by the contract.

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 generally expected to travel in economy class for such claims.

The Personal Money cover typically indemnifies for losses of cash, banknotes, travellers’ cheques, and money orders directly resulting from theft, robbery, or burglary. While the insured’s wallet was stolen, the insurer’s stance in Case 35 suggests that a preceding act of negligence, such as leaving the wallet unattended in a public place, might be interpreted as breaking the direct causal link required for a theft claim under this specific cover. The loss, in this interpretation, is seen as a consequence of the insured’s carelessness rather than a pure act of theft against a secured item. Therefore, the insurer would likely decline the claim based on the argument that the loss was not a direct result of theft as defined by the policy, but rather a consequence of the insured’s own actions.

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 cover 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 sell a policy that covers a specific valuable item like a watch for its full value if it’s not part of the standard travel insurance package they are authorized to offer, even if the item is intended for travel.

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 vicarious liability (which deals with liability for another’s actions), warranty (which is an absolute undertaking), or waiver (which is an act of forgiveness).

The Insurance Agents Registration Board (IARB) is responsible for maintaining a register of insurance agents and their appointed Responsible Officers and Technical Representatives. This register, along with a sub-register, is kept in a format determined by the Insurance Authority (IA) and must be accessible for public inspection. This accessibility is crucial for transparency and allows the public to verify the registration status of individuals acting as insurance agents. Therefore, the IARB must ensure that these registers are available for public viewing.

This question tests the understanding of the remedies available to an insurer when the duty of utmost good faith is breached by the insured. Specifically, it focuses on the insurer’s right to avoid the contract. According to the principles of insurance law, an insurer can avoid the contract if there’s a breach of utmost good faith. This avoidance typically means the contract is treated as if it never existed from the inception. Consequently, premiums paid are generally returnable to the insured, unless the breach was fraudulent. The insurer does not have the option to selectively apply the avoidance to specific claims or periods of the policy; the entire contract is voidable. Therefore, the insurer must return premiums paid, and the contract is voided from the start.

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 organize. 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 watch is intended for travel, because such a policy would fall outside the defined ‘travel insurance’ and ‘Restricted Scope Travel Business’.

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.

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 tied to the act of providing advice.

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.