IIQE Paper 1 Principles of Insurance question: policy within a reasonable time

IIQE Paper 1Principles of Insurance

An insurer finds that Mr Kan deliberately hid two earlier fire claims when proposing. It avoids the policy within a reasonable time. The premiums he paid are:

A returnable after deducting the insurer's costs
B returnable for the period after the breach was found
C generally not returnable, as the breach was fraudulent
D returnable in full, as the contract is avoided from inception

Show the answer and explanation

Answer: C. generally not returnable, as the breach was fraudulent

Answer: generally not returnable, as the breach was fraudulent. Deliberate concealment is fraudulent non-disclosure. On avoidance, premiums paid are generally returnable, unless the breach was fraudulent on the part of the insured or his agent.Why not the others:• returnable after deducting the insurer's costs: there is no rule allowing a costs deduction; fraud removes the refund.• returnable for the period after the breach was found: avoidance is from inception; the refund question turns on fraud, not on a period.• returnable in full, as the contract is avoided from inception: premiums are generally returned on avoidance, except where the insured or his agent acted fraudulently.Watch out: Assuming avoidance from inception always means a full refund.Rule: Fraud by the insured or his agent: premiums are generally not returnable on avoidance.Source: IA P1 Study Notes, 2024 Edition (8th ed., Nov 2024; for exams from 17 Feb 2025), 3.2.6, p. 3/7

Common mistake

Assuming avoidance from inception always means a full refund.

Practise more IIQE Paper 1 Principles of Insurance questions

Exam-style questions with worked answers, then full timed mocks. Free to start.

Start practising →

Study note: Principles of Insurance IIQE Paper 1 practice questions & mock exams

Related IIQE Paper 1 questions

Export cargo waiting at a container depot is damaged by fire: the loss is HK$500,000. The marine policy pays HK$400,000, its limit. A fire policy extended to the depot has the standard Marine Clause. The fire policy Mr Tse is selling his insured car to Ms Yip. Which arrangement for assigning the motor policy to her meets the insurable interest requirement?A personal accident policy excludes injury 'directly or indirectly caused by' riot. Hurrying home along a dark back lane because a riot has closed his usual route, the insured trips on a kerb and breaks a leg. The claim is most likely

Build a daily practice habit — a few exam-style questions a day, with worked answers. Free to start.

Start practising →

Original study material written to the public IIQE Paper 1 syllabus. Independent, not endorsed by the Insurance Authority or the VTC. Verify figures and rules against current guidance before relying on them.