Mixed Deck — All BCP Topics Flashcards

What must an insurer disclose to policyholders under MAS Notice 318 (for general insurance)?

Answer: Key features, exclusions, claims procedures, and cooling-off rights

MAS Notice 318 requires general insurers to disclose key product features, important exclusions, claims procedures, and where applicable, cooling-off rights to ensure policyholders can make informed decisions.

What role does a 'loss adjuster' play in Singapore insurance claims?

Answer: Independently investigates and assesses the extent of loss on behalf of the insurer

A loss adjuster is an independent professional appointed by the insurer to investigate the circumstances of a claim, determine the cause, and assess the quantum of loss.

What is the key difference between a 'participating' and 'non-participating' life insurance policy in Singapore?

Answer: Participating policies share in the insurer's surplus/profits; non-participating do not

Participating policies entitle the policyholder to receive bonuses from the insurer's participating fund surplus. Non-participating policies offer guaranteed benefits only.

During a health insurance application in Singapore, an individual states that they have never had any respiratory issues. They genuinely forgot about a single, minor asthma diagnosis in early childhood that has not required treatment for over 20 years. How would this incorrect statement most likely be classified under Singapore law?

Answer: Innocent misrepresentation.

Since the applicant made the false statement honestly with a genuine belief that it was true (having forgotten about a minor, distant medical event), it is classified as an innocent misrepresentation. It is not fraudulent as there was no intent to deceive, nor is it negligent if there was no reason for them to have reasonably remembered it. The insurer's remedy is typically to avoid the contract and return the premiums.

What is the 'free-look' period for life insurance policies purchased in Singapore?

Answer: 14 days

In Singapore, policyholders have a 14-day free-look period from the date they receive the policy document to review and cancel a life insurance policy with a full refund of premiums paid.

What does 'proximate cause' determine in a Singapore insurance claim?

Answer: The dominant or effective cause of the loss

Proximate cause identifies the dominant, effective, or operative cause of a loss. A claim is payable only if the proximate cause is a peril covered under the policy.

A financial adviser representative is advising a client with a low-risk tolerance and a primary goal of capital preservation. The representative recommends an investment-linked policy (ILP) with a high allocation to volatile equity sub-funds, primarily because this product offers the highest sales commission. Which of the five Fair Dealing Outcomes established by the Monetary Authority of Singapore (MAS) has the representative MOST directly breached?

Answer: Financial institutions offer products and services that are suitable for their target customer segments.

The representative has failed to recommend a product that is suitable for the client's stated risk tolerance and financial goals. This is a direct breach of Fair Dealing Outcome 2, which states that financial institutions must offer products and services that are suitable for their target customers. The recommendation was driven by the representative's own interest (higher commission) rather than the client's needs.

What is 'insurable interest' as required in Singapore insurance law?

Answer: Having a financial interest in the subject matter of insurance

Insurable interest means the policyholder must have a legitimate financial stake in the subject matter insured. Without it, the insurance contract is not legally enforceable in Singapore.

In motor insurance, what does 'Third Party Only' (TPO) coverage provide?

Answer: Coverage for injuries and damage caused to other parties by the insured

Third Party Only (TPO) motor insurance covers the insured's legal liability to third parties for bodily injury and property damage caused by the insured's vehicle, but does not cover the insured's own vehicle.

An insurance agent advises a client to surrender an existing life policy with Company X to purchase a new, similar policy from Company Y, which the agent now represents. The agent highlights the new policy's features but fails to explain the financial disadvantages of the switch, such as the loss of accumulated cash value and a new incontestability period. This unethical practice is best described in the Singapore context as:

Answer: Twisting

Twisting is the unethical practice of inducing a policyholder to replace an existing life insurance policy with a new one from a different insurer through misrepresentation or incomplete comparison, to the detriment of the policyholder. The agent's primary motivation is often to earn a new first-year commission. The Life Insurance Association (LIA) Singapore has guidelines prohibiting this practice.

Which of the following is typically EXCLUDED from a standard property insurance policy?

Answer: Gradual deterioration and wear and tear

Gradual deterioration and wear and tear is typically excluded from property insurance policies because insurance covers sudden, unforeseen events — not inevitable deterioration over time.

In a Comprehensive motor policy, what additional coverage does the insured have compared to Third Party Only?

Answer: Own damage to the insured vehicle, fire, and theft

Comprehensive motor insurance includes own damage (accidental damage to the insured's own vehicle), fire, and theft coverage in addition to third-party liability, providing the broadest motor protection.

What is the ethical requirement regarding confidentiality for insurance professionals in Singapore?

Answer: Client information must be kept confidential and not disclosed without consent or legal requirement

Insurance professionals are ethically and legally obligated to maintain strict confidentiality of all client information, disclosing it only with the client's consent or when legally required (e.g., AML reporting).

What is 'co-insurance' in the Singapore insurance market?

Answer: When two or more insurers share the same risk, each covering a specified percentage

Co-insurance involves multiple insurers sharing a single risk, with each taking a specified percentage. One insurer acts as the lead, issuing the policy and handling claims on behalf of all.

What is 'retrocession' in the context of reinsurance?

Answer: When a reinsurer transfers part of the risk it has accepted to another reinsurer

Retrocession is the process by which a reinsurer cedes part of the risk it has accepted to another reinsurer (called a retrocessionaire), further spreading the risk in the market.

What is a 'stop loss' reinsurance arrangement?

Answer: A non-proportional arrangement where the reinsurer pays when the cedant's aggregate losses in a period exceed a defined percentage of premiums

Stop loss reinsurance protects the cedant against an adverse overall loss ratio by triggering reinsurer payments when aggregate losses exceed a defined threshold, typically expressed as a percentage of earned premiums.

What information must an insurer provide when rejecting a claim in Singapore?

Answer: Clear written reasons for the rejection, referencing the specific policy provision or ground for denial

When rejecting a claim, MAS expects insurers to provide clear written reasons citing the specific policy provision, exclusion, or ground for denial, enabling the policyholder to understand and potentially challenge the decision.

Which peril is typically covered under a Contractors' All Risks (CAR) policy?

Answer: Accidental physical loss or damage to the contract works

A Contractors' All Risks (CAR) policy covers accidental physical loss or damage to the contract works, plant, and equipment during construction, subject to policy exclusions.

An individual, who is not a registered agent for XYZ Insurer, arranges a fire insurance policy for a friend with XYZ Insurer without their knowledge or authority. This individual collects the premium and forwards it with the proposal form. XYZ Insurer, upon reviewing the documents and being fully aware the individual is not their agent, decides to accept the premium and issues the policy. This action by XYZ Insurer is an example of the creation of an agency relationship by:

Answer: Ratification

Ratification occurs when a principal retrospectively approves and adopts an unauthorised act done on its behalf by an agent or a purported agent. By knowingly accepting the premium and issuing the policy, XYZ Insurer has validated the unauthorised act, creating a binding contract and retrospectively authorising the individual's actions for that specific transaction.

What type of life insurance policy pays a benefit only if the insured dies within a specified period?

Answer: Term life policy

Term life insurance provides coverage for a specified period (e.g., 10, 20, or 30 years). If the insured survives the term, no benefit is paid and the policy expires.