ChFC09 Ethics for the Financial Services Professional Free Practice Test Two

Correct: The Barometer of Liability Agreement (BOLA) is an industry-wide agreement established by the General Insurance Association of Singapore (GIA). Its primary purpose is to provide a standardized guide for insurers to settle claims efficiently and reduce disputes for common accident types. However, it is a contractual agreement between insurers and does not have the force of law; therefore, it does not take away an insured person’s right to pursue the matter in court if they disagree with the assessment.

Incorrect: It is incorrect to state that the BOLA is a statutory instrument or that it is legally binding on the Singapore judiciary, as courts determine liability based on the law of negligence and specific evidence. It is also incorrect to claim it is a mandatory framework from the Monetary Authority of Singapore (MAS) that overrides evidence, as MAS focuses on prudential and conduct supervision rather than setting specific accident liability scales. Furthermore, the BOLA is widely used for various motor accidents, including those involving private cars, not just commercial heavy vehicles.

Takeaway: The BOLA is a GIA industry guide for standardizing motor claim liability between insurers but does not override a policyholder’s legal right to seek a judicial ruling.

Correct: In the Singapore insurance market, the standard definition of an accident in Personal Accident (PA) policies requires the event to be sudden, unforeseen, and caused by external, violent, and visible means. This precise wording is a critical control because it distinguishes accidental injuries from those caused by natural illnesses, degenerative conditions, or gradual wear and tear. By requiring the injury to be independent of other causes, the insurer ensures that the proximate cause is indeed an accident, which aligns with the principles taught in the SCI BCP modules.

Incorrect: Broadening the interpretation to include gradual deterioration would transform a Personal Accident policy into a health or disability policy, which contradicts the fundamental principle of ‘accident.’ Relying on the insured’s subjective assessment creates inconsistency and legal uncertainty, as the definition must be objective. Restricting coverage only to employment-related activities describes the scope of a Work Injury Compensation Act (WICA) policy or a specific group cover rather than the fundamental definition of accidental injury used to manage risk in general PA insurance.

Takeaway: The standard definition of an accident as sudden, external, and visible is the primary mechanism used to distinguish accidental injuries from illnesses or gradual physical decline.

Correct: Under the MAS Guidelines on Risk Management Practices and corporate governance standards for Singapore insurers, the internal audit function must be independent of the business activities it audits. A direct reporting line to the Board Audit Committee ensures that the internal audit can provide an objective and unbiased assessment of the insurer’s compliance with the Insurance Act and MAS regulations without interference from executive management.

Incorrect: Requiring CEO approval for audit findings compromises the independence of the audit function and may lead to the suppression of critical compliance issues. Restricting the audit scope to financial statements ignores the broader regulatory requirements set by MAS, such as market conduct and risk management. Outsourcing the function without Board oversight is a failure of corporate governance, as the Board remains ultimately responsible for ensuring an effective internal control environment.

Takeaway: The independence of the internal audit function, facilitated by a direct reporting line to the Board Audit Committee, is critical for effective monitoring of MAS regulatory compliance in Singapore insurers.

Correct: Under Singapore’s Work Injury Compensation Act (WICA), Average Monthly Earnings (AME) are calculated based on the employee’s earnings over the 12 months prior to the accident. This includes basic wages, overtime pay, bonuses, and commissions. It ensures that the compensation reflects the employee’s actual earning capacity, including variable components that are part of their regular remuneration.

Incorrect: Excluding variable components like overtime or bonuses is incorrect because WICA specifically requires their inclusion to reflect true earnings. Including employer CPF contributions is incorrect as these are statutory contributions by the employer and not part of the employee’s earnings for AME purposes. Using only the month immediately preceding the accident is incorrect because the standard look-back period is 12 months to account for fluctuations in earnings.

Takeaway: Average Monthly Earnings (AME) under WICA include basic pay, overtime, and bonuses over a 12-month period but exclude employer CPF contributions.

Correct: The GIA Code of Practice, which sets the standard for general insurance conduct in Singapore, specifies that insurers should aim to pay the claim within 14 days once the settlement offer has been accepted by the claimant. This ensures the process remains efficient and fair to the policyholder, maintaining trust in the insurance industry.

Incorrect: The 7-day timeframe is the standard for acknowledging a new claim or responding to a claim inquiry, not for final payment. The 30-day timeframe is the benchmark for an insurer to make a decision or offer after receiving all necessary documentation. A 10-day timeframe for bank details is not a specific standard defined in the GIA Code of Practice for the overall payment obligation following acceptance.

Takeaway: Under the GIA Code of Practice in Singapore, insurers are expected to settle and pay claims within 14 days of the claimant accepting the settlement offer.

Correct: Under the principle of utmost good faith (uberrimae fidei) in Singapore, a material fact is defined using the prudent insurer test. This means the proposer must disclose every circumstance that would influence the judgment of a prudent insurer in fixing the premium or determining whether they will take the risk. In this scenario, leasing part of the building to a courier service changes the risk profile and must be disclosed regardless of whether a specific question was asked.

Incorrect: The suggestion that disclosure is limited to what the proposer personally deems significant is incorrect because the standard is objective (the prudent insurer), not subjective. Limiting disclosure only to questions asked in a proposal form is a common misconception; the duty of disclosure in general insurance often extends to all material facts known to the proposer. Focusing solely on financial solvency for premium payments is incorrect as material facts must relate to the risk being insured, such as physical hazards or liability exposures.

Takeaway: A material fact is any information that influences a prudent insurer’s assessment of the risk or the premium charged, regardless of whether it was explicitly requested.

Correct: In Singapore’s general insurance market, the policy contract typically grants the insurer the right to choose the method of indemnity. While cash is the most practical and frequent method, the insurer may opt for repair, replacement, or reinstatement if it is more cost-effective or appropriate, provided the insured is returned to the same financial position they were in before the loss, up to the sum insured.

Incorrect: The idea that the insured has the primary right to choose the method is incorrect, as the option usually lies with the insurer under standard policy terms. The claim that reinstatement only applies to total losses is false, as repairs to a partially damaged building are a form of reinstatement. The suggestion that an insurer would pay beyond the sum insured during reinstatement is incorrect; the sum insured remains the maximum limit of the insurer’s liability regardless of the method chosen.

Takeaway: The insurer generally retains the contractual right to decide whether to indemnify the insured via cash payment, repair, replacement, or reinstatement, subject to the sum insured.

Correct: Under Singapore’s Work Injury Compensation Act (WICA), employers are mandated to purchase work injury compensation insurance for all manual workers (regardless of salary) and all non-manual workers earning a monthly salary of $2,600 or less. Since the administrative assistants earn $2,400, they fall below the statutory threshold, making insurance mandatory regardless of the perceived risk level of the office environment.

Incorrect: The suggestion that a low-risk environment or non-manual status exempts the firm is incorrect because the salary threshold of $2,600 triggers the mandatory insurance requirement for non-manual staff. Relying on an employee opt-in for a personal accident policy is incorrect as WICA insurance is a statutory obligation that cannot be substituted by voluntary benefits. The frequency of business travel is not a determining factor for the mandatory insurance requirement under WICA, which focuses on salary and the nature of the work.

Takeaway: In Singapore, Work Injury Compensation insurance is compulsory for all manual workers and for non-manual workers earning a monthly salary of $2,600 or less.

Correct: In Singapore, Professional Indemnity insurance is almost exclusively written on a ‘claims-made’ basis. This means the policy triggered is the one in force at the time the claim is made against the insured and reported to the insurer. However, the ‘retroactive date’ acts as a boundary; the insurer will not cover claims arising from professional services or negligent acts performed before that specific date, even if the claim is made during the current policy period.

Incorrect: The suggestion that the policy covers acts occurring during the period regardless of when the claim is filed describes a ‘losses occurring’ basis, which is typical for Public Liability but not PI. The idea that the Financial Advisers Act (FAA) automatically grants full historical coverage regardless of the retroactive date is incorrect, as the retroactive date is a contractual limit agreed upon by the insurer and the insured. The claim that both the act and the claim must occur in the same single year is overly restrictive and does not reflect the standard operation of retroactive dates in the Singapore insurance market.

Takeaway: Professional Indemnity insurance in Singapore operates on a claims-made basis, covering claims reported during the policy period for acts occurring after the retroactive date.

Correct: The operative clause is the core of the insurance contract that specifies the circumstances under which the insurer will pay. In Singapore’s general insurance practice, clearly defining the scope of indemnity and the specific perils covered (or the ‘all risks’ nature) is the most effective control to ensure both parties understand the contract’s boundaries, thereby reducing disputes related to the principle of proximate cause.

Incorrect: Using broad, non-specific language increases the risk of the ‘contra proferentem’ rule being applied against the insurer in Singapore courts. Keeping the description only in the schedule without a robust operative clause creates a fragmented contract that is harder to interpret legally. While utmost good faith is a fundamental principle, it is not a substitute for clear contractual drafting and cannot be used to fix an ambiguous operative clause after a loss has occurred.

Takeaway: A precisely drafted operative clause is essential for defining the insurer’s obligations and ensuring the clear application of the proximate cause principle in the event of a claim.

Correct: In the Singapore insurance market, the concept of unearned premium refers to the portion of the premium that corresponds to the unexpired period of the policy. Since the insurer has not yet provided coverage for the remaining eight months, this amount cannot be recognized as income and must be held as a liability (Unearned Premium Reserve) to meet future claims and expenses.

Incorrect: Recognizing the full premium as earned immediately is incorrect because it violates the accrual principle where income must match the period of risk exposure. Treating it as a contingent asset is incorrect as the premium is a liability for future service, not an asset dependent on an uncertain future event. Classifying the entire amount as an administrative fee ignores the fundamental insurance principle that premium is paid for the transfer of risk over a specific duration.

Takeaway: Unearned premium is a liability representing the portion of the premium for the unexpired risk period, while earned premium is the income recognized for the duration of coverage already provided.

Correct: In the Singapore insurance industry, the surveyor’s primary role is to act as an independent expert who identifies the extent of damage and, crucially, determines the proximate cause. This is essential for the insurer to decide if the loss is covered under the specific terms of the policy, such as the Institute Cargo Clauses (A, B, or C). Their technical assessment provides the factual basis for the claim adjustment.

Incorrect: Negotiating a settlement before policy review is incorrect because the surveyor is a fact-finder, not a claims authorized officer or legal negotiator. Focusing only on the lowest repair quote ignores the importance of restoring the item to its pre-loss condition and adhering to safety or manufacturer standards, which is vital in both motor and marine insurance. Advising the insured to release the carrier from liability is detrimental to the insurer’s subrogation rights, which the surveyor should help protect by documenting the carrier’s potential fault.

Takeaway: The surveyor serves as an independent technical expert whose main duty is to establish the cause and extent of loss to determine policy liability.

Correct: Under the Insurance Act in Singapore, any person or firm carrying on business as an insurance broker must be registered with the Monetary Authority of Singapore (MAS). Certain entities, such as banks licensed under the Banking Act or merchant banks, may be considered exempt insurance brokers but must still comply with specific conduct of business requirements. Registration ensures that brokers meet the necessary fit and proper criteria and financial requirements to protect the interests of the insuring public.

Incorrect: Membership with the General Insurance Association (GIA) is a requirement for insurance agents under the industry’s framework, but brokers are regulated and registered directly by MAS under the Insurance Act. General insurance brokerage is strictly regulated by law and is not subject only to self-regulation. While a firm may hold other licenses (like a CMS license), it does not grant automatic status as an insurance broker; the firm must still meet the specific legal definitions and registration requirements set out in the Insurance Act.

Takeaway: In Singapore, insurance brokers must be registered with the Monetary Authority of Singapore (MAS) or be legally classified as an exempt insurance broker under the Insurance Act.

Correct: In Singapore, for general insurance (which is a contract of indemnity), the insured must have an insurable interest in the subject matter at the time of the loss. Insurable interest requires a legal or equitable relationship between the insured and the subject matter of insurance. Since the parent company has divested the subsidiary and no longer owns the building or holds a formal legal interest (like a lease), it no longer suffers a direct financial loss recognized by law if the building is damaged, making the policy unenforceable.

Incorrect: The suggestion that paying premiums creates an insurable interest is incorrect; payment is a contractual duty but does not substitute for the legal requirement of interest in the subject matter. The claim that interest is only required at inception is a characteristic of life insurance, not general insurance, where interest must typically exist at the time of loss. Finally, a mere moral obligation or expectation of loss is insufficient under Singapore law; there must be a recognized legal or equitable right to the property.

Takeaway: Under Singapore law, a valid general insurance claim requires the insured to have a legal or equitable insurable interest in the subject matter at the time the loss occurs.

Correct: Under the Motor Claims Framework (MCF) promoted by the General Insurance Association of Singapore (GIA), all motor accidents must be reported to the insurer within 24 hours or by the next working day. A key enforcement mechanism of this framework is that failure to report within this timeframe results in a 10% reduction in the policyholder’s No Claims Discount (NCD) at the next renewal, regardless of whether the policyholder is at fault or intends to make a claim.

Incorrect: The suggestion that the NCD is completely forfeited for three years is incorrect as the standard MCF penalty is a 10% reduction for late reporting. The idea that the NCD remains unaffected if costs are below the excess is a common misconception; the reporting requirement is absolute regardless of damage value. The claim that the reduction only applies if a third-party claim is filed is also incorrect, as the 10% NCD penalty is specifically for the breach of the reporting timeline itself, independent of the eventual claim outcome.

Takeaway: In Singapore, the Motor Claims Framework mandates accident reporting within 24 hours to avoid a mandatory 10% reduction in the No Claims Discount (NCD).

Correct: For a risk to be insurable under general insurance principles in Singapore, it must be fortuitous, meaning the loss must be accidental and not inevitable. Since the failure is expected due to known flaws, it is not fortuitous. Additionally, the loss must be capable of financial measurement (pecuniary value). Reputational loss that cannot be quantified in money fails the requirement for financial measurement, as insurance is intended to provide financial compensation for a measurable loss.

Incorrect: Speculative risks involve a chance of gain or loss and are generally uninsurable, but project failures are typically pure risks; the error here is claiming they ‘always’ involve a chance of gain. Insurable interest does apply to a company’s projects and assets, so claiming it is prohibited for intangible outcomes is incorrect. The law of large numbers requires a large number of similar (homogeneous) risks, but they do not need to be ‘identical across the entire sector’ for a specific risk to be insurable.

Takeaway: To be insurable, a risk must be accidental (fortuitous) and the resulting loss must be capable of being measured in financial terms.

Correct: In accordance with the GIA Code of Practice and MAS guidelines in Singapore, insurance intermediaries must be transparent about their status. An agent represents the insurer (the principal) and must disclose this relationship to the prospect at the outset. This ensures the client understands that the agent is not an independent broker who searches the entire market, but rather a representative of specific insurance companies.

Incorrect: Providing a general market overview without specific disclosure fails to meet the transparency requirements regarding the intermediary’s own status. Claiming all intermediaries act as independent fiduciaries is factually incorrect as agents represent the insurer. Delaying disclosure until the policy is issued is a breach of conduct, as disclosure must occur before the contract is concluded. Relying on GIA registration as a substitute for active disclosure is incorrect, as the onus is on the intermediary to inform the client directly.

Takeaway: Insurance agents in Singapore must clearly disclose their agency status and the insurers they represent to clients at the beginning of the sales process to ensure transparency of representation.

Correct: In Singapore, the Work Injury Compensation Act (WICA) requires employers to maintain valid insurance for all employees (with few exceptions). Under the principle of utmost good faith and the duty of disclosure, any material change in risk—such as a significant increase in headcount or a change in the nature of work—must be disclosed to the insurer immediately. Failure to do so could lead to the insurer voiding the policy or rejecting claims, leaving the employer liable for compensation and in breach of Ministry of Manpower (MOM) regulations.

Incorrect: Waiting until renewal is incorrect because it leaves the client with inadequate coverage and in potential breach of statutory requirements during the interim. Recommending a Public Liability policy is incorrect because Public Liability insurance is not a substitute for the mandatory statutory coverage required under WICA. While payroll adjustments are a feature of WICA policies, the intermediary must ensure the insurer is aware of the change in risk profile and headcount to ensure the policy remains valid and enforceable throughout the period of insurance.

Takeaway: In the Singapore commercial insurance market, intermediaries must ensure clients promptly disclose material changes in risk to maintain compliance with the Work Injury Compensation Act and the principle of utmost good faith.

Correct: In Singapore general insurance practice, the Arbitration Clause is specifically intended for disputes concerning the ‘quantum’ (the amount of the loss) when liability has already been admitted by the insurer. Under the standard clause, obtaining an arbitration award is often a ‘condition precedent,’ meaning the insured cannot initiate legal proceedings in court to recover the amount until the arbitration process has been completed and an award issued.

Incorrect: Escalating to court immediately is incorrect because the arbitration clause usually acts as a condition precedent for quantum disputes. The Monetary Authority of Singapore (MAS) is a regulatory body and does not adjudicate individual contractual disputes over claim amounts. FIDReC provides an alternative dispute resolution path, but it has a specific jurisdictional limit (currently 100,000 Singapore Dollars for most claims), and it does not have ‘exclusive’ jurisdiction that would override a valid arbitration agreement in a commercial contract for larger amounts.

Takeaway: The Arbitration Clause in Singapore general insurance applies only to disputes over the amount of the claim (quantum) and typically requires an arbitration award before any court action can be taken.

Correct: In Singapore, the Motor Vehicles (Third Party Risks and Compensation) Act requires insurers to satisfy judgments in favor of third parties regarding death or bodily injury, even if the insured has breached a policy condition such as driving under the influence of alcohol. While the insurer can deny the ‘Own Damage’ claim based on the policy exclusion, they must pay the third party for personal injuries and subsequently seek recovery of those costs from the insured driver.

Incorrect: Repudiating third-party bodily injury claims based on policy exclusions is generally not permitted under Singapore’s statutory framework, which prioritizes the protection of accident victims. Waiting for criminal court finality does not absolve the insurer of its immediate statutory duties toward third-party claimants. The Motor Insurers’ Bureau (MIB) is intended for cases involving untraced or uninsured drivers; since a policy exists in this scenario, the insurer remains the primary party responsible for the third-party statutory liability.

Takeaway: Under Singapore law, insurers must settle third-party bodily injury claims despite alcohol exclusions, but they retain the right to recover these payments from the insured.

Correct: In Singapore’s general insurance principles, a peril is defined as the cause of the loss. In this scenario, the fire is the actual event that caused the damage to the property (the servers). While the faulty wiring or short circuit is the condition that made the loss more likely (the hazard), the fire is the peril that triggered the claim.

Incorrect: Classifying the fire as a physical hazard is incorrect because a hazard is a condition that increases the likelihood or severity of a loss, not the cause of the loss itself. Identifying the short circuit as the peril and the fire as a consequence reverses the standard insurance definitions where the fire is the immediate cause of damage. Classifying the fire as a moral hazard is incorrect because moral hazard refers to the human element, such as dishonesty or lack of integrity, that increases the probability of a loss, rather than the physical event of a fire.

Takeaway: A peril is the specific cause of loss, such as fire or windstorm, whereas a hazard is a condition that increases the chance of that peril occurring.

Correct: According to the Workplace Safety and Health (Incident Reporting) Regulations in Singapore, for any work-related accident that results in more than three days of medical leave (whether consecutive or not) or at least 24 hours of hospitalization, the employer is legally obligated to submit a report to the Ministry of Manpower (MOM) within 10 days of the occurrence.

Incorrect: The suggestion that an employer has 14 days to report is incorrect as the statutory limit is 10 days. The idea that reporting is contingent upon the employee’s intent to file a WICA claim is a misconception; reporting is a mandatory regulatory requirement for workplace safety monitoring regardless of whether a claim is pursued. Finally, while an employer must notify their insurer for claim processing, the legal duty to report the incident to the Ministry of Manpower rests solely with the employer and cannot be delegated to the insurer as a primary legal obligation.

Takeaway: In Singapore, employers must report work-related accidents resulting in more than three days of medical leave to the Ministry of Manpower within 10 days.

Correct: In Singapore’s fire insurance market, the nature of construction and the nature of occupation are primary rating factors. Using combustible materials like timber (construction) and engaging in hazardous activities like paint manufacturing (occupation) significantly increase the risk of fire spread and intensity, thereby justifying a premium loading to reflect the higher risk assumed by the insurer.

Incorrect: Installing fire alarms linked to the SCDF or using fire-rated doors are risk-mitigation measures that typically qualify for premium discounts or rebates rather than loadings. Increasing the voluntary excess or having a good claims history are factors that generally lead to premium reductions because they reduce the insurer’s potential payout or indicate a lower probability of loss. Favorable location factors, such as proximity to a fire station and good accessibility for emergency vehicles, are considered positive risk features that would not warrant a premium increase.

Takeaway: Fire insurance premiums are primarily driven by the combustibility of the building structure and the inherent hazards associated with the business activities performed on-site.

Correct: In Singapore, the Motor Claims Framework (MCF) emphasizes the importance of reporting accidents within 24 hours or the next working day. The Independent Damage Assessment Centre (IDAC) plays a crucial role by providing an unbiased, third-party assessment of the vehicle damage. This ensures that the damage is documented accurately and independently before repairs begin, which helps prevent inflated claims and ensures transparency in the motor insurance industry.

Incorrect: The IDAC is not a legal arbitrator; liability is determined by the insurers based on the Barometer of Liability Chart or through legal channels if necessary. IDACs are assessment centers, not repair workshops; while some authorized workshops also serve as reporting centers, the IDAC’s specific role is assessment. IDACs do not provide cash reimbursements or settlements; their function is to document and assess damage for the insurer’s subsequent processing.

Takeaway: The IDAC ensures the integrity of the motor claims process in Singapore by providing an objective damage assessment before repairs are initiated.

Correct: In Singapore, the principle of contribution is a corollary of the principle of indemnity. For contribution to apply between insurers, several conditions must be met: the policies must cover the same subject matter (the warehouse), the same peril (fire), the same interest (e.g., the owner’s interest), and both policies must be legally enforceable and liable for the loss at the time it occurs.

Incorrect: The requirement for identical premium scales or dates is incorrect as contribution can apply even if policy terms and durations differ, provided they overlap at the time of loss. Explicitly naming both insurers in an endorsement is not a prerequisite for the legal principle of contribution to function. The sum insured does not need to be exactly double the market value; contribution is triggered whenever there is double insurance, regardless of the specific ratio of over-insurance.

Takeaway: The principle of contribution requires that multiple insurance policies cover the same subject matter, peril, and interest for the insurers to share the indemnity payment.

Correct: In Singapore, general insurance policies typically include a condition that the insured must not admit liability, make any offer, or promise payment to a third party without the written consent of the insurer. By admitting negligence and promising compensation, the insured prejudices the insurer’s position and their right to defend or settle the claim, which constitutes a breach of the insured’s duties upon the occurrence of a loss.

Incorrect: The idea that admitting liability is a form of loss mitigation is incorrect because mitigation refers to physical or financial steps to stop further damage, not legal admissions that compromise the insurer’s defense. The PDPA relates to personal data protection and does not mandate admitting liability in insurance scenarios. There is no regulation from the Monetary Authority of Singapore (MAS) that forces an insurer to honor an unauthorized admission of liability; rather, the contract of insurance governs the conduct of claims.

Takeaway: An insured must never admit liability or negotiate settlements with third parties without the insurer’s express consent, as doing so violates standard policy conditions and may lead to a denial of the claim.

Correct: Under the Work Injury Compensation Act (WICA) in Singapore, employers are legally required to maintain work injury compensation insurance for all employees doing manual work, regardless of their salary level. While there is a salary threshold for non-manual workers to be compulsorily insured, no such cap exists for manual workers; they must be covered by a WIC policy to ensure business continuity and legal compliance.

Incorrect: The suggestion that insurance is only required for high-risk workplaces is incorrect as WICA applies to all manual labor across all industries. Substituting WIC insurance with a Group Personal Accident policy is not permitted because a private accident policy does not meet the statutory obligations and benefits defined under WICA. The claim that a salary cap exempts manual workers is a common misconception that applies only to non-manual employees.

Takeaway: In Singapore, the Work Injury Compensation Act mandates insurance for all manual workers regardless of their salary level, whereas salary thresholds only apply to non-manual workers.

Correct: In the Singapore insurance market, claims history is a fundamental tool for risk assessment. A high frequency of claims, even if small, can indicate a higher probability of future losses or a lack of risk mitigation by the insured (moral hazard). Underwriters use this data to adjust the terms of the contract, such as increasing the premium (loading) or the portion of the loss the insured must bear (deductible), to ensure the risk remains within the insurer’s appetite.

Incorrect: Automatically rejecting a renewal based on a specific loss ratio is a commercial decision rather than a regulatory mandate for solvency. While sanctions screening is a mandatory AML/CFT requirement in Singapore, it does not supersede the need for proper technical underwriting of the insurance risk. The Insurance Act does not mandate no-claims discounts; these are commercial features offered by insurers, and frequent claims would typically disqualify a policyholder from such benefits.

Takeaway: Claims history is a key indicator of risk quality and moral hazard, allowing underwriters to recalibrate policy terms and pricing to reflect the actual risk level at renewal.

Correct: The IBF Standards represent the national competency framework for the financial industry in Singapore. They define the skills, knowledge, and abilities required for various job roles, providing a clear pathway for certification and ensuring that practitioners maintain high professional standards through a structured roadmap.

Incorrect: The Monetary Authority of Singapore (MAS), not the IBF, is the statutory regulator responsible for licensing under the Financial Advisers Act. The Financial Industry Disputes Resolution Centre (FIDReC) is the body that handles consumer disputes, not the IBF. Commercial terms and policy exclusions are determined by individual insurance companies based on their underwriting appetite and market competition, rather than being mandated by the IBF.

Takeaway: The IBF Standards function as the industry-wide benchmark for professional competency and skill development in Singapore’s financial services sector to ensure high levels of practitioner proficiency.

Correct: In accordance with MAS AML/CFT guidelines (such as MAS Notice 3001), a risk-based approach is applied to Domestic PEPs and International Organization PEPs. They are only treated as high-risk if there are specific risk factors present. However, Foreign PEPs are always considered high-risk by default, and financial institutions must perform Enhanced Due Diligence (EDD) regardless of other factors.

Incorrect: Treating all PEPs as automatically high-risk is incorrect because MAS allows for a risk-based approach for domestic and international organization PEPs. There is no 12-month exemption rule for domestic PEPs; their status is determined by their position and influence. Tying the identification of a PEP solely to a dollar threshold for gifts is incorrect, as AML/CFT identification requirements apply to the onboarding and ongoing monitoring of the person’s status regardless of specific transaction amounts.

Takeaway: Under Singapore regulations, Foreign PEPs are always high-risk, while Domestic PEPs require a risk-based assessment to determine if Enhanced Due Diligence is necessary.