IIQE Paper 2 Legal Implications of Rebating of Commission 支付及收受回佣的法律後果 Practice questions

Question 1

Which statement best describes rebating of commission?

Accepted Answer

The insurance intermediary returns part of their commission to the customer, reducing the customer's effective premium cost

Answer

The insurer grants a renewal discount because the customer has made no claim

Answer

The insurer refunds part of the premium following early cancellation of the policy

Answer

The insurance intermediary returns all commission to the insurer, with no payment to the customer

Question 2

Which statement about rebating of commission is NOT correct?

Accepted Answer

Every commission rebate necessarily constitutes bribery and corruption, regardless of the circumstances

Answer

It can reduce the customer's effective cost of buying insurance

Answer

Using it as an improper inducement to obtain business raises serious concerns

Answer

It may constitute bribery and corruption in certain circumstances

Question 3

When marketing and distributing insurance products, authorized insurers should not offer customers premium or commission rebates, except for rebates recorded in insurance contracts or promotional material. An authorized insurer verbally promises Mr Chow a rebate, but it is not recorded in the policy, policy schedule, quotation, offer letter or promotional material. Which statement is most appropriate?

Accepted Answer

The arrangement cannot rely on the recorded-rebate exception

Answer

Mr Chow's knowledge of the rebate is enough to satisfy the recorded-rebate exception

Answer

Reducing Mr Chow's effective cost is enough to satisfy the exception

Answer

The absence of a documentary record proves that the arrangement necessarily constitutes bribery and corruption

Question 4

When marketing and distributing insurance products, authorized insurers should not offer customers premium or commission rebates, except for rebates recorded in insurance contracts, for example in a policy, policy schedule, quotation or offer letter, or in promotional material. An authorized insurer offers Ms Chan a premium rebate clearly recorded in the quotation forming part of the insurance contract, but it is not repeated in the main policy wording. Which statement is correct?

Accepted Answer

The quotation is a document in which a rebate may be recorded, so the arrangement falls within the recorded-rebate exception

Answer

All premium rebates are outside the general principle that authorized insurers should not offer rebates to customers

Answer

The rebate must be recorded in the policy, policy schedule, quotation, offer letter and promotional material to qualify for the exception

Answer

Only rebates recorded in the main policy wording qualify for the exception

Question 5

When marketing and distributing insurance products, authorized insurers should not offer customers premium or commission rebates, except for rebates recorded in insurance contracts or promotional material. Which of the following documents or materials can provide the required record? (i) A policy schedule; (ii) a quotation or offer letter; (iii) promotional material; (iv) a purely verbal promise with no documentary record.

Accepted Answer

(i), (ii) and (iii) only

Answer

(i) and (ii) only

Answer

(i), (iii) and (iv) only

Answer

(i), (ii), (iii) and (iv)

Question 6

When marketing and distributing insurance products, authorized insurers should not offer customers premium or commission rebates, except for rebates recorded in insurance contracts or promotional material. Which should maintain robust internal procedures and controls to observe this principle? (i) Authorized insurers; (ii) licensed insurance agencies; (iii) licensed insurance broker companies; (iv) customers buying insurance solely in a personal capacity.

Accepted Answer

(i), (ii) and (iii) only

Answer

(i) only

Answer

(ii), (iii) and (iv) only

Answer

(i), (ii), (iii) and (iv)

Question 7

Rebating occurs when an insurance intermediary gives part of their commission to a client, reducing the client's effective premium. Apart from possible bribery and corruption in certain circumstances, which two areas does this practice undermine?

Accepted Answer

Premium rating and the honest determination of intermediaries' proper commission

Answer

Policy coverage and limits of liability

Answer

Insurable interest and the principle of indemnity

Answer

Premium levies and cooling-off arrangements

Question 8

Mr Ho works for a licensed insurance broker company and is reviewing its rebate procedures. The company should maintain robust internal procedures and controls to observe the principle that authorized insurers should not offer customers premium or commission rebates when marketing and distributing insurance products, except for rebates recorded in insurance contracts or promotional material. Which objective best reflects the purpose of these controls?

Accepted Answer

Helping customers assess whether products meet their insurance needs and make informed decisions

Answer

Ensuring customers always choose the product offering the largest rebate

Answer

Ensuring every customer receives the same rebate amount

Answer

Ensuring all rebates recorded in insurance contracts are withdrawn

Legal Implications of Rebating of Commission 支付及收受回佣的法律後果

Meaning and Effect of Rebating of Commission 回佣的意思與實際效果

Improper Inducements and Legal Risks 不當利誘與法律風險

The General Principle and Recorded-Rebate Exception 一般原則與已記錄回贈的例外

Internal Controls and Informed Customer Decisions 內部管控與客戶的知情決定

Practice