Policy Servicing, Claims, Surrender, Switching and Post-Sale Obligations
What the exam tests
This domain tests what happens after the sale: policy delivery, premium collection, fund switches, withdrawals, surrender, death claims, annual statements, complaints and changes in fund options. It rewards precise knowledge of timing and charges.
Servicing and transactions
The insurer delivers the policy and a cooling-off notice; the client normally has 21 days from delivery to cancel, with a refund of premiums paid adjusted for any market loss and without a surrender charge. Premiums are due on the stated dates; a grace period (often 30 or 31 days) applies before lapse, and reinstatement may require evidence of insurability. Switching moves units between funds; it may be limited, charged and subject to valuation dates. Partial withdrawals reduce the policy value and may reduce the death benefit; surrender pays the policy value less any surrender charge. Annual statements show units, fund performance and charges.
Claims
On death, the beneficiary or executor notifies the insurer and provides proof, typically a death certificate, policy documents and beneficiary identification. The death benefit is calculated under the policy formula. Suicide exclusions commonly apply in the first year, with a refund of premiums instead of the sum assured. Misstatement of age or sex may lead to adjustment. The insurer should pay within a reasonable time after receiving complete proof.
Worked example
A policyholder pays HK$100,000 single premium. In year two, the policy value is HK$80,000 and the death benefit is the higher of policy value or 101% of premium (HK$101,000). The client dies by suicide in year one; the insurer refunds premiums paid rather than paying HK$101,000. If instead the client switches HK$50,000 from Fund A to Fund B with a 1% switch fee, HK$500 is deducted and the remaining HK$49,500 buys units in Fund B at the applicable offer price.
Traps
Do not assume surrender value equals policy value; check the surrender charge. Do not say switching is always free or immediate. Do not ignore the suicide exclusion or misstatement provisions. Do not pay a death claim to the estate when a valid beneficiary nomination exists. Do not forget the cooling-off refund adjustment. Do not ignore the insurer's duty to notify fund closures or fee changes.