BASIC INSURANCE CONCEPTS & PRINCIPLES (BCP) STUDY GUIDE (4 TH EDITION, 2013)

Transcription

1 BASIC INSURANCE CONCEPTS & PRINCIPLES (BCP) STUDY GUIDE (4 TH EDITION, 2013) Version 1.1 Issued On: 6 January 2015 Note: (1) This Version 1.1 of the amendments below shall apply to any candidate who sits for the BCP examination as from 9 March 2015 onwards. (2) The next set of amendments, if any, will be issued on 1 October Amendments are made to the BCP Study Guide (4 th Edition, 2013) as follows: 1. Chapter 1, Section 1, Page 2 By deleting paragraph 4 of Section 1 and substituting the following paragraph: Intermediaries refer to insurance agents and insurance brokers, including reinsurance brokers. Under Section 1A of the Insurance Act (Cap. 142), insurance intermediary means a person who, as an agent for one or more insurers or as an agent for insureds or intending insureds, arranges contracts of insurance in Singapore, and includes an insurance agent or an insurance broker. 2. Chapter 1, Section 4.1, Pages 3 to 5 By deleting Section 4.1, including Subsections and 4.1.2, and substituting those in Annex A (see Pages 5 to 7 of this document). 3. Chapter 1, Section 4.2, Page 5 By deleting paragraph 1 of Section 4.2 and substituting the following paragraph: An insurance broker is licensed under the Insurance Act (Cap. 142) as a person to carry on insurance business as an agent for insureds or intending insureds. 4. Chapter 1, Section 4.2, Page 6 By deleting the last paragraph of Section 4.2 and substituting the following paragraph: Under Section 35ZN(1) of the Insurance Act (Cap. 142), the following are exempted from registration as insurance brokers: a bank licensed under the Banking Act (Cap. 19); a merchant bank approved as a financial institution and approved to carry on business as an insurance broker under the Monetary Authority of Singapore Act (Cap. 186); a licensed financial adviser under the Financial Advisers Act (Cap. 110); (d) a holder of a capital markets services licence under the Securities and Futures Act (Cap. 289); Copyright reserved by Singapore College of Insurance Limited Page 1 of 7

2 (e) a finance company which has been granted an exemption from Section 25(2) of the Finance Companies Act (Cap. 108) to carry on business as an insurance broker; (f) a direct insurer licensed to carry on life business; and (g) such other persons or class of persons as may be prescribed, subject to such conditions as MAS may impose. 5. Chapter 1, Section 4.3, Page 7 Add the following sentences to the last paragraph of Section 4.3: Lloyd s members may carry on insurance business in Singapore through locallyincorporated service companies which are registered with the Administrator of the Scheme. Lloyd s of London (Asia) Pte Ltd is the approved Administrator of the Scheme. 6. Chapter 1, Section 5.1, Page 7 By deleting the 4 th sentence in the paragraph 2 of Section 5.1 and substituting the All insurance companies operating in Singapore must be licensed under the Insurance Act (Cap. 142), and are regulated and supervised by MAS. 7. Chapter 1, Section 5.2, Page 8 By deleting the 2 nd sentence in paragraph 1 of Section 5.2 and substituting the They are licensed in Singapore and are restricted to carry out life reinsurance and/or general reinsurance business in Singapore. 8. Chapter 1, Section 5.4, Page 10 By deleting the 1 st sentence in paragraph 1 of Section 5.4 and substituting the following sentence: Captive insurers are licensed in Singapore to insure principally the risks of their parents and related companies as defined under Section 6 of the Companies Act (Cap. 50). 9. Chapter 1, Section 5.6, Page 11 By deleting paragraphs 3 and 4 of Section 5.6 and substituting the following paragraphs: A marine mutual insurer is licensed under the Insurance Act (Cap. 142) as a direct insurer to carry on general business, and which is permitted to carry on marine mutual insurance business only. The Insurance (General Provisions and Exemptions for Marine Mutual Insurers) Regulations 2007, issued by MAS and effective on 1 January 2008, specify that marine Copyright reserved by Singapore College of Insurance Limited Page 2 of 7

3 mutual insurance business means the business of providing the insurance of liabilities under insurance policies on the basis of mutual insurance on any of the following risks: (d) (e) risks upon goods, merchandise or property of any description transported on board vessels, including incidental transit before and after shipment; risks upon the freight of, or any other interest in or relating to, vessels; risks upon vessels, or upon machinery, tackle furniture or equipment of vessels; risks against damage arising out of or in connection with the use of vessels, including third-party risks; or risks incidental to the construction, repair or docking of vessels, including thirdparty risks. 10. Chapter 1, Section 11.2, Page 25 By deleting the 1 st sentence in paragraph 1 of Section 11.2 and substituting the As Singapore s central bank and financial regulatory authority, various instruments under the Acts are issued and administered by MAS. 11. Chapter 2, Section 3.3.1, Page 43 By deleting the 1 st sentence in paragraph 2 of Section and substituting the For example, a fire insurer will indemnify the insured based on the actual property damage and losses caused by the insured perils. 12. Chapter 3, Section 5.3.2, Page 77 By deleting the last sentence of Section 5.32 and substituting the For example, property insurers who pay claims for damage to buildings may have rights of recovery against the insured s tenant who is legally responsible for the damage under the terms of the lease agreement. 13. Chapter 6, Section 6.5, Page 150 By adding the following paragraphs after the last paragraph of Section 6.5: Since 20 December 2013, the General Insurance Association of Singapore (GIA) has launched a toll-free hotline to deter and combat insurance fraud. If anyone suspects any fraud in an insurance claim, or possesses such pertinent information, he can call this hotline or visit the GIA website to submit an online Form For Reporting Fraud to report accordingly. There is usually a condition in the policy to state that any benefit shall be forfeited if: the claim is in any way fraudulent, including inflating or exaggerating the claim, or submitting forged or falsified documents; any fraudulent means or devices are used to obtain any benefit or payment under the policy; or Copyright reserved by Singapore College of Insurance Limited Page 3 of 7

4 any destruction or damage is caused by the wilful act (e.g. arson) of the insured, or anyone acting on behalf of or in collusion with the insured. 14. Chapter 6, Section 7.5.2, Page 153 By deleting the first sentence in paragraph 2 of Section and substituting the Essentially, the agreement spells out how damage (material damage to the motor vehicle or its accessories, including towing charges, but excluding survey fees) to the two motor vehicles involved in a collision are to be borne by the government and the insurer, regardless of who is to be blamed for the accident. 15. Chapter 6, Section 9.1.3, Page 155 By deleting the entire Section and substituting the following section: Total Loss And Average An insurance loss normally arises as a result of an injury to the insured or to a third party or damage to the insured's own property or a third-party property brought about through an insured peril that results in a claim. Every loss is either total or partial. A total loss may be actual or constructive. Under an actual total loss, the insurer will pay the full sum insured for claims under a property insurance claim (or the market value of the property, depending on the terms of the policy). The insurer will be entitled to any salvage value realised from the wreck under such circumstances. However, the insurer may decide not to deal with the salvage on some occasions because there may be little or no value remaining. An actual total loss occurs when the whole subject matter of insurance is completely destroyed by an insured event or peril. For example, this can happen when an insured building is totally burned to the ground, or when an insured vessel sinks into a deep ocean and cannot be completely retrieved or salvaged. On the other hand, a "constructive total loss" describes a situation in which the subject matter of insurance is not completely destroyed, but is damaged beyond economical repair. What this means is that it would cost more to repair than to pay the insured the sum insured as if it is a total loss. For example, a motorcycle insured under the comprehensive cover of Motor Insurance is damaged in a head-on collision and wrecked, such that the total repair cost will exceed its sum insured or market value. Rather than repair the vehicle, the insurer can choose to pay the insured the sum insured. Any salvage value to be realised from the wreck is for the benefit of the insurer. In essence, the subject matter is not totally and physically destroyed but the full sum insured is paid out, hence, the term "constructive total loss. A partial loss, is any loss or damage short of, or not amounting to a total loss. In this instance, a loss covered by a policy does not totally destroy or render worthless the insured property. Where the insurance is subject to "average" and there is underinsurance, the insured will be paid only a proportion of the partial loss. Copyright reserved by Singapore College of Insurance Limited Page 4 of 7

5 Annex A To Version 1.1 Of BCP Amendments 4.1 Insurance Agents Generally, an insurance agent is a person who is or has been carrying on insurance business in Singapore as an agent for one or more insurers, and includes an agent of a foreign insurer carrying on insurance business in Singapore under a foreign insurer scheme under Part IIA of the Insurance Act (Cap.142). For the purpose of registration with the Agents Registration Board (ARB) under the General Insurance Association of Singapore (GIA) as an insurance agent in accordance with the mandatory requirements of the Notice No: MAS 211 (Minimum And Best Practice Training And Competency Standards For Direct General Insurers), an applicant may be classified under any one of the following: individual agents; corporate agents (generally known as agencies), namely sole proprietorships, partnerships, limited liability partnerships and companies registered with the Accounting and Corporate Regulatory Authority (ACRA), as well as societies and co-operative societies registered with the Registry of Societies (ROS); and Trade Specific Agents. All the above-mentioned entities may appoint nominee agents which must also be registered with the ARB Trade Specific Agents Trade Specific Agents (TSAs) are engaged in a business of which insurance is not their core business, and usually sell only one type of insurance product (e.g. travel agencies selling Travel Insurance) in the course of their core business activities. The various types of TSAs engaging in insurance sales and/or advisory services are listed below: (d) (e) (f) (g) (h) credit card providers; freight forwarders; foreign domestic maid agencies; foreign worker agencies; mobile device dealers; motor vehicle dealers; travel agencies; and electrical and electronic retailers General Insurance Agents Registration Regulations The General Insurance Agents Registration Regulations (GIARRs) have been in force since 1 October They provide the framework and procedures for the registration of general insurance agents with the ARB, according to the mandatory registration and other requirements of Notice No: MAS 211 issued by the Monetary Authority of Singapore (MAS) under Section 64(2) of the Insurance Act (Cap. 142). All Copyright reserved by Singapore College of Insurance Limited Page 5 of 7

6 applicants registering with the ARB must comply with and satisfy the mandatory requirements of this Notice. As stated in this Notice, it applies to all direct insurers, but does not apply to captive insurers, marine mutual insurers and financial guarantee insurers. With effect from 1 January 2015, the revision of the GIARRs serves to fulfil the following objectives to: streamline to define the roles, responsibilities and accountabilities of the agents, principals (insurers) and the ARB; strengthen the regulation framework to enhance standards, provide clarity on definition of terms in alignment with regulatory changes, such as relating to the Insurance Act (Cap. 142) and the Personal Data Protection Act 2012; and introduce audit function by the ARB. The GIARRs will also apply to the TSAs. The Agency Management Framework, as well as the Trade Specific Agency Framework, will form an integral part of the GIARRs. The GIARRs specify that a person (individual or entity) shall not arrange, or hold himself out as entitled to arrange, a contract of insurance as an agent for an insurer, unless and until he has: (i) (ii) been duly registered with the ARB through his principal(s) the registered agent being classified as either a Cash Agent or Credit Agent ); and entered into an Agency Agreement in writing with his principal (the insurer that he is representing) as specified under Section 35M of the Insurance Act (Cap. 142). The agent s identity card will no longer be issued from 1 January Agents (including consumers) can access the Agents Registration and CPD Management (ARCM) system of the GIA showing details of their principals if they are active agents. Changes in representation of the agents principals will be on real time basis. For details, refer to the GIA Website at: Among others, all agents (including TSAs) and their nominee agents must essentially comply with the following: (1) General Insurance Agents Registration Regulations; (2) Fit & Proper Criteria; (3) Agency Management Framework for insurance agents, or Trade Specific Agency Management Framework for TSAs; (4) Code of Practice for Agents (including any code of conduct, ethics and guidelines as specified by the agent s principal); (5) Premium Payment Framework; (6) Continuous Professional Development (CPD) requirements; and Copyright reserved by Singapore College of Insurance Limited Page 6 of 7

7 (7) Personal Data Protection Act 2012 (PDPA) on the collection, use or disclosure of data as required or authorised in accordance with the PDPA; However, all TSAs and their nominee agents are exempted from the condition on minimum academic qualifications. Those in respect of motor vehicle dealers are required to fulfil four CPD hours yearly, before they can be renewed as TSAs selling Motor Insurance. All other TSAs and their nominee agents are exempted from the CPD requirements. Under the Code of Practice for Agents in connection with the GIARRs, an agent shall not enter into any agreement or arrangement whatsoever for the appointment or engagement of any sub-agent. Under the GIARRs, an agent can represent up to a maximum of three general insurers or principals at any given time. In addition, it is a mandatory requirement for general insurers to accept insurance business only from qualified agents registered with the ARB. Agents are remunerated by the insurers in the form of commission (usually as a percentage of the premium in respect of the policy sold, and may include profit-sharing commission, depending on business volume and profitability) as specified in their Agency Agreements. Copyright reserved by Singapore College of Insurance Limited Page 7 of 7