Paper VI - Travel Insurance Agents

In the context of travel insurance, particularly concerning the ‘pre-existing conditions’ proviso, the key consideration is whether a reasonable person would have been prompted to cancel their journey at the time the insurance certificate was issued. The insurer’s perspective is crucial here; they assess whether the insured was aware of circumstances that would very likely cause the trip to be curtailed or re-routed.

Regarding curtailment of a trip, travel insurance typically indemnifies the insured for losses such as pre-paid travel fare or accommodation expenses and additional costs of returning to the place of origin, provided the curtailment is due to specified perils. These perils often include death or sickness of the insured person or their immediate family member, travelling companion, or close business partner, which disables any of them from continuing with the trip. Other insured perils may include hijack of aircrafts or conveyances, unexpected outbreak of an epidemic or of riot or civil commotion, natural disasters, damage to the insured person’s principal home in Hong Kong arising from fire, flood or burglary, and issuance of an outbound travel alert.

Exclusions may apply, such as bankruptcy, liquidation, or default of travel agencies, tour operators, or common carriers. Another exclusion may be the insured person’s failure to immediately notify travel agencies, tour operators, or common carriers of the necessity to curtail the trip because of the death or sickness of or injury to an immediate family member or close business partner of the insured person. Therefore, statements I, II and III are correct.

Travel insurance policies typically offer coverage for loss or damage to baggage and personal effects caused by insured perils during a trip. This coverage is usually subject to certain limits per item or per insured person. Some policies may offer ‘new for old’ coverage, potentially limited to items not older than one year. Without this provision, deductions for wear and tear and depreciation are common. Standard exclusions often include specific types of property like food, animals, jewelry, mobile phones, and documents, as well as confiscation by authorities, baggage sent in advance, unattended baggage in public places, damage to fragile items, losses not reported to the police within a specified timeframe, and mysterious disappearances. The principle of indemnity ensures that the insured is placed in the same financial position after a loss as they were before, without profiting from the loss. Therefore, depreciation or betterment allowances may be applied to reflect any improved condition after repairs. Insurers generally consider articles made of glass as ‘fragile articles’ for the purposes of exclusion clauses.

When assessing claims involving sets of items, insurers consider whether the items can function independently. If an item’s primary function requires connection to another item, they are likely considered a set. However, if an item has independent functionality, it may not be considered part of a set, even if it can be used together with another item. The ‘care of property’ provision requires insured individuals to take reasonable precautions to protect their belongings. Insurers assess whether the insured acted reasonably under the circumstances. Leaving belongings in the care of a responsible party, such as a tour bus driver, may be considered reasonable care, especially if it’s common practice and the loss was unforeseeable and beyond the insured’s control. These principles are important for travel insurance agents to understand when advising clients and processing claims, ensuring fair and accurate application of policy terms in accordance with HK IIQE standards.

The law of tort, as it relates to insurance, is a critical area. It deals with civil wrongs, most notably negligence, that can lead to a claim against the person who committed the wrong. Understanding tort law is crucial because it forms the basis for an insurer’s subrogation rights, allowing them to recover losses from the responsible party after paying out a claim. This concept is particularly relevant in liability insurance, where the insurer steps into the shoes of the insured to defend against or pursue claims arising from tortious acts. It’s important to differentiate tort from other legal concepts like breach of contract or criminal acts, focusing on the duty of care, breach of that duty, causation, and damages. In the context of the HK IIQE exam, a solid grasp of tort principles is essential for assessing liability and understanding the scope of insurance coverage.

According to the Code of Practice for the Administration of Insurance Agents, a registered person assisting with the completion of a proposal or application form must not influence the potential policyholder and must clarify that the answers provided are the policyholder’s responsibility. They must also explain the consequences of fraud, non-disclosure, and inaccuracies, directing the policyholder to the relevant statements on the form. This ensures transparency and protects both the policyholder and the agent. Therefore, the correct course of action is to explain the implications of providing false information.

The Sex Discrimination Ordinance (SDO) aims to eliminate discrimination based on sex, marital status, or pregnancy. The Disability Discrimination Ordinance (DDO) targets discrimination based on disability. The Family Status Discrimination Ordinance (FSDO) addresses discrimination related to family status. The Race Discrimination Ordinance (RDO) prohibits discrimination based on race. Therefore, all of the above statements are correct.

Emergency services under travel insurance policies, as relevant to the HK IIQE Paper 6, typically include emergency evacuation, repatriation for medical care, repatriation of remains, and burial/funeral expenses. Emergency evacuation covers transportation, medical services, and supplies to the nearest adequate medical facility when immediate treatment is required but unavailable locally. Compassionate visits provide coverage for family members to travel to be with the insured in case of death, serious injury, or sickness. The return of unattended children covers expenses to return dependent children home if the insured person dies or is hospitalized for an extended period. Repatriation of remains covers the cost of returning mortal remains to the place of origin. Burial and funeral expenses provide a specified sum for such costs if the insured dies during the trip. A key exclusion is treatment that can be reasonably delayed until the insured returns home. Therefore, all of the above statements are correct.

Travel insurance policies typically cover trip cancellations only for specific, named perils. These perils often include the insured’s or a close family member’s death, sickness, or injury, civil unrest or epidemics at the destination, jury duty, or significant damage to the insured’s home. The policy is designed to protect against unforeseen events that make the trip impossible or unsafe. It’s important to note that pre-existing conditions known at the time of purchasing the insurance are generally excluded from coverage. Operational reasons for cancellation by the travel provider are also typically not covered. This aligns with the principles of IIQE Paper 6, emphasizing the importance of understanding the scope and limitations of travel insurance policies.

According to the Personal Data (Privacy) Ordinance, personal data should only be used for the purposes for which it was collected or a directly related purpose, unless the data subject gives consent. Disclosing customer data for unrelated promotional activities without consent violates this principle. Therefore, insurance practitioners must obtain prescribed consent before using customer data for promotional purposes.

In cases where an insurer denies a claim based on policy exclusions, such as indirect involvement in hazardous activities or failure to report an accident within a specified timeframe, the Complaints Panel assesses whether the insurer’s decision aligns with the policy terms and conditions. The panel considers factors such as the interpretation of exclusion clauses, the reasonableness of the insured’s actions, and whether the insurer’s position has been prejudiced by any delays in reporting. The principle of proximate cause is also considered when determining the applicability of exclusions. For instance, if a loss occurs in a war zone but is determined to be the result of a traffic accident unrelated to the war, the war exclusion may not apply. The assessment of claims related to accidental injuries requires determining whether the injury was caused by an accident and whether any pre-existing conditions or external factors contributed to the injury. The panel also considers whether the insured’s death resulted solely from an injury caused by an accident, as required by the policy terms.

According to the regulations governing insurance agents in Hong Kong, an insurance agent must secure consent from their existing principal(s) before accepting an appointment to represent another principal. This requirement ensures transparency and avoids potential conflicts of interest among the various parties involved. This rule is designed to maintain ethical standards and protect the interests of all principals.

In cases of non-disclosure, the Complaints Panel assesses whether the undisclosed information was significant enough to influence the insurer’s decision to provide coverage. The panel considers the severity, frequency, and recency of the condition, as well as any medical reports or evidence provided by the insured. The panel also considers whether rejecting the claim is proportionate to the nature of the non-disclosure. The key is whether the fact, if known, would have altered the insurer’s underwriting decision. This principle is crucial in medical expenses and hospital benefits sections of travel insurance policies, aligning with the proposer’s duty to disclose material facts during the application stage as per HK IIQE guidelines.

The Insurance Complaints Bureau (ICCB) serves as an impartial entity for resolving disputes between insurers and policyholders. However, the ICCB’s jurisdiction is subject to specific limitations. The complaint must be claim-related, and the claim amount should not exceed HK$800,000. The insurer must be an ICCB member, and the policy must be a personal insurance policy. The complaint should be filed by a policyholder, beneficiary, or rightful claimant within six months of the insurer’s final decision. Disputes arising from commercial, industrial, or third-party insurance, or claims subject to legal proceedings or arbitration, are outside the ICCB’s purview. Therefore, only the scenario where all criteria are met falls under the ICCB’s jurisdiction.

The Personal Data (Privacy) Ordinance allows for ‘other means’ of compliance when a contract with a data processor isn’t feasible. This involves non-contractual oversight and auditing. Good practices include transparency with data subjects, ensuring enforceability of contracts (if any) in relevant jurisdictions, keeping records of data transfers, and using anonymized data for system testing where possible. Disclosing personal data obtained without consent, with intent to gain or cause loss, or causing psychological harm, is an offense. Defenses exist if the disclosure was for crime prevention, legally required, believed to be consented to, or for public interest journalism. Data subjects can complain to the PCPD and sue for damages resulting from breaches. In outsourcing scenarios, the data user is liable for the data processor’s wrongful acts. Therefore, all of the above statements are correct.

According to IARB-GN9, an individual should not present themselves as a Responsible Officer or Technical Representative of an insurance agent before they have been officially registered by the IARB. Engaging in Restricted Scope Travel Business before registration is also prohibited. The IARB may deem a person unfit if they do not display their name and registration number on premium receipts for travel insurance directly arranged for clients. Furthermore, IARB-GN10 specifies that Registered Persons engaging only in Restricted Scope Travel Business must complete 3 CPD hours annually to comply with the Continuing Professional Development requirements.

Personal liability coverage in travel insurance provides financial protection to the insured against legal liabilities arising from accidental bodily injury to a third party or accidental damage to their property during the insured trip. This coverage typically includes the payment of legal costs and expenses incurred in defending against such claims, subject to the policy’s limit of indemnity. However, certain exclusions apply, such as liabilities related to employer’s liability, damage to the insured’s own property, contractual liabilities, liabilities arising from the use of conveyances or firearms, and liabilities to immediate family members.

In handling claims from third parties, it’s crucial for the insured to notify the insurer promptly and obtain their consent before admitting liability or entering into any settlement agreements. Failure to do so may result in the insurer denying coverage, as it could prejudice their ability to negotiate a more favorable settlement. However, insurers may, in certain circumstances, choose to settle claims on an ex gratia basis, considering the specific circumstances of the case and the insured’s situation. This demonstrates a pragmatic approach to claim settlement, balancing the policy terms with the need for fair and reasonable outcomes. This is aligned with the principles of the HK IIQE Paper 6 Travel Insurance Agents Examination, which emphasizes understanding the scope and limitations of personal liability coverage in travel insurance policies.

The personal liability section of a travel insurance policy typically covers accidental bodily injury to a third party or accidental loss of or damage to a third party’s property occurring during the insured trip. However, it usually excludes liability for damage to property belonging to or under the care, custody, or control of the insured person. Therefore, damage to the insured’s own belongings is generally not covered under the personal liability section of a travel insurance policy.

According to the Code of Practice for the Administration of Insurance Agents, when assisting a potential policyholder with completing a proposal or application, a registered person must not influence the potential policyholder and must make it clear that the answers or statements given are the latter’s own responsibility. The registered person should also explain to the potential policyholder the consequences of fraud, non-disclosure, and inaccuracies, drawing their attention to the relevant statements on the form. This ensures transparency and protects the interests of the policyholder, aligning with the ethical standards expected of insurance agents in Hong Kong. Therefore, refraining from influencing the applicant and explaining the consequences of fraud are key responsibilities.

The Hong Kong Federation of Insurers (HKFI) sets out guidelines for insurers regarding claim handling. Insurers are expected to handle claims fairly, efficiently, and promptly. Unreasonable denial of claims, especially those involving non-disclosure of material facts where no proposal form was obtained, is discouraged. Innocent misrepresentation of material facts (except in marine or aviation insurance) should not lead to claim denial. Breaches of warranty committed without fraud that did not cause the loss should also not be grounds for denial. Claim forms should be issued promptly and free of charge, using understandable language. Claimants should be kept informed of the progress of their claims, and reasonable explanations should be provided if a claim is denied. Valid claims should be paid promptly, and third parties acting for the insurer should act reasonably and be professionally qualified. Therefore, insurers are expected to handle claims fairly and efficiently.

The Insurance Authority (IA) and the Insurance Agents Registration Board (IARB) set standards for who can be registered as an insurance agent. If a person’s registration is terminated due to IARB or IA requirements, or if the IARB believes they don’t understand their ethical duties, they may be deemed unfit. The IARB also assesses the fitness of an agency’s Responsible Officers, Technical Representatives, controllers, and directors. Minimum qualifications include being 18 years old, holding a valid Hong Kong residency status, meeting specific education standards (Form 5 or equivalent), passing the relevant Insurance Intermediaries Qualifying Examination (IIQE) papers, and adhering to IA or HKFI rules. Failing to engage in insurance-related work for two consecutive years after passing an IIQE paper nullifies the qualification. Registered persons must also comply with the Continuing Professional Development Programme. Principals must use a written agency agreement that meets HKFI requirements, including the Conduct of Registered Persons. Registered persons must act in good faith, cooperate with investigations, and identify themselves as registered agents before discussing policies. Therefore, maintaining ethical conduct, continuous professional development, and adherence to regulatory requirements are crucial for registered insurance agents in Hong Kong.

An insurance intermediary’s role in preventing fraud involves several key aspects. They must be vigilant for suspicious activities, such as unexplained increases in sums insured. Diligence in maintaining accurate and up-to-date records is also crucial, as is open communication with the insurer, especially when suspicious circumstances arise. Above all, maintaining the highest moral standards and integrity is paramount for insurance agents and brokers. The insurance intermediary’s role is to assist the insurer, and indeed the law, in resisting attempted fraud and in revealing fraud. Therefore, all of the above statements are correct.

Travel insurance policies often include a hospital cash allowance, providing a fixed sum for each day of hospital stay, subject to limits and waiting periods. This benefit typically requires that the hospitalization results from an illness or accidental injury during the insured trip and is subject to similar exclusions as the medical expenses section.

Case 23 illustrates that hospital confinement solely for rehabilitation, convalescence, or rest is generally excluded from hospital benefit coverage. Case 24 emphasizes that hospitalization must be medically necessary to qualify for the hospital cash allowance. If diagnostic tests can be effectively performed on an outpatient basis, hospitalization might be deemed unnecessary. Case 25 further clarifies that hospitalization should be medically necessary and not merely for the convenience of the insured or doctor. If the primary purpose of hospitalization is for diagnostic scanning or physical therapy that could be done on a day-care basis, the claim may be rejected. Therefore, statements I, II and III are correct.

The primary functions of insurance revolve around risk management, offering financial protection against potential losses. Risk transfer is a core mechanism where the financial burden of a risk is shifted from an individual or entity to an insurer. Insurance also facilitates loss prevention through incentives and risk mitigation strategies, contributing to overall economic stability by enabling businesses and individuals to undertake ventures with reduced financial uncertainty. Therefore, the correct answer highlights these fundamental aspects of insurance.

Insurers in Hong Kong are expected to conduct regular assessments of their complaint management systems to ensure they effectively address customer expectations. Upon receiving a complaint, insurers should promptly acknowledge it in writing, providing the complainant with the contact information of the designated complaint handler, the anticipated date for a final response, and details of the internal complaint handling procedures. Insurers are encouraged to provide a final response or an explanation for any delay, along with an expected date for the final response, within 30 days of receiving the complaint. The final response should include the investigation’s outcome, whether the insurer was at fault, any proposed resolution, and the timeline for its implementation. If the complainant remains unsatisfied, insurers should inform them about the Insurance Agents Registration Board, the Insurance Claims Complaints Bureau (ICCB), and the Insurance Authority as avenues for further recourse. Insurers must maintain detailed records of complaints and provide them to regulatory bodies upon request. The ICCB handles complaints from individual policyholders concerning personal insurance contracts, with the Insurance Claims Complaints Panel (the ‘Panel’) appointed to manage these complaints. The Panel operates independently, with a Chairman appointed with the consent of the Secretary for Financial Services and the Treasury. The Panel consists of members nominated by the HKFI and representatives from outside the insurance industry. Complainants are not charged any fees, regardless of the outcome. The Panel can award up to HK$800,000 against an insurer, who cannot appeal the decision. However, the complainant can pursue legal action if dissatisfied with the award. The Panel’s rulings consider the policy terms, general principles of good insurance practice, applicable laws, and guidelines issued by the HKFI or the Bureau. The Panel can look beyond the strict interpretation of policy terms if it deems the result unfair to the complainant. The Code of Conduct for Insurers, particularly ‘Part III: Claims,’ emphasizes the importance of handling claims efficiently, speedily, and fairly.

In the context of travel insurance and personal accident claims, the Complaints Panel’s decisions highlight several key principles. The panel considers the insured’s medical history to determine if an injury was truly accidental, especially when pre-existing conditions are involved. They also emphasize that the intention of an insurance contract is to cover unforeseen and unintentional events. When interpreting exclusion clauses, the panel may adopt a purposive approach, focusing on the intent of the contract rather than a strict literal interpretation, particularly when dealing with ambiguous terms like ‘violation of law.’ Furthermore, the burden of proof lies on the insurer to demonstrate that an exclusion applies, and this proof must be reliable and supported by credible evidence. Therefore, statements I and II are correct.

The Insurance Agents Registration Board (IARB) mandates specific actions for Registered Persons (RPs) who do not comply with Continuing Professional Development (CPD) requirements. Failing to meet CPD requirements typically results in a registration revocation for a minimum of three months, with a requirement to complete all outstanding CPD hours before re-registration. Making a false declaration about CPD hours leads to a revocation for at least twelve months, along with the need to complete pending CPD hours for re-registration. Ignoring IARB requests for CPD compliance proof results in a revocation period determined by the IARB, and future registration applications are contingent on providing this proof. Therefore, all of the above statements are correct.

Insurers in Hong Kong are expected to conduct regular assessments of their complaint management systems to ensure they effectively address customer expectations. Upon receiving a complaint, insurers should promptly acknowledge it in writing, providing the complainant with the contact details of the assigned complaint handler, the anticipated date for a final response, and an outline of the internal complaint handling procedures. Insurers are encouraged to provide either a final response or an explanation for any delay, along with a revised expected date, within 30 days of receiving the complaint. The final response should include the investigation’s outcome, an assessment of any fault on the insurer’s part, details of any proposed resolution, and the timeline for implementing it. If a complainant remains unsatisfied with the insurer’s response, they should be informed of their option to refer the matter to the Insurance Agents Registration Board, the Insurance Claims Complaints Bureau, or the Insurance Authority. Insurers are required to maintain thorough records of all complaints and provide them to relevant regulatory bodies upon request. The Insurance Claims Complaints Bureau (ICCB) handles complaints from individual policyholders concerning personal insurance contracts. The Insurance Claims Complaints Panel, appointed by the ICCB, consists of an independent Chairman and four members. The Panel operates independently, with the Chairman appointed with the consent of the Secretary for Financial Services and the Treasury. The Panel’s composition includes representatives from the HKFI and external professionals. Complainants are not charged any fees, regardless of the outcome. The Panel can award up to HK$800,000 against an insurer, who cannot appeal the decision. However, the complainant can pursue legal action if dissatisfied with the award. The Panel considers the policy terms, principles of good insurance practice, applicable laws, and guidelines issued by the HKFI or the Bureau when making rulings. The Panel can look beyond the strict interpretation of policy terms if it deems the result unfair to the complainant. The Panel relies on the standards set out in The Code of Conduct for Insurers, particularly Part III: Claims, which emphasizes efficient, speedy, and fair claims handling.

The agency agreement can be terminated under several circumstances. Mutual agreement allows both parties to end the agreement on mutually acceptable terms. Revocation allows either party to cancel the agreement, subject to contract terms. A fundamental breach of contract by either party allows the other to end the agreement. The death or insanity of either party, or the liquidation of a corporate party, will also terminate the agreement due to the personal nature of the relationship. Illegality, where the agreement’s performance becomes unlawful, also ends the agreement. Finally, if the agreement is for a fixed period, it terminates at the end of that period. Understanding these termination conditions is crucial for travel insurance agents operating within the legal framework of Hong Kong, as governed by the Insurance Ordinance and related regulations.

Capital redemption contracts, categorized under Class F, focus on providing a capital sum at the end of a specified term, primarily to replace capital, such as repayable debentures. This class is distinct from human life-related insurances. Retirement scheme management categories I, II, and III (Classes G, H, and I respectively) pertain to group retirement schemes. Class I offers guaranteed capital or return, Class II does not, and Class III provides insurance benefits under retirement schemes, excluding Classes G and H. General business insurance is divided into 17 categories. Travel insurance is predominantly considered ‘category 1 Accident insurance’. Therefore, statements I and II are correct.

Travel insurance policies, like other insurance types, have specific claims procedures that insured individuals must adhere to from the moment an event occurs that could lead to a claim. These procedures often include notifying the insurer of the incident, completing and submitting a claim form, and providing documentary evidence to support the claim. Documents such as receipts for lost or damaged items, police reports for theft or damage, and airline statements for lost baggage may be required.

It is crucial for the insured not to admit liability to a third party without the insurer’s written consent. Doing so could compromise the insurer’s ability to defend against a claim and may result in the denial of coverage under the personal liability section of the policy.

Travel insurance policies may include an arbitration provision for resolving claims disputes. This provision typically requires arbitration to begin within a specified timeframe after the insurer denies liability. Alternatively, the policy may specify a time limit for initiating legal proceedings against the insurer.

In addition to arbitration or legal action, insured individuals can file claims-related complaints with the Insurance Claims Complaints Bureau, which aims to facilitate the settlement or withdrawal of complaints through awards or other means.

Regarding settlement options, the baggage and personal effects section of a travel insurance policy often allows the insurer to settle claims through cash payment or other methods such as repair, replacement, or reinstatement. If the policy does not specify settlement options, the insurer is generally obligated to settle valid claims with a cash payment. However, it’s worth noting that travel insurers often pay for emergency services directly to the service providers rather than reimbursing the insured.
Therefore, all of the above statements are correct.