LLQP Accident & Sickness · Component 3.1 · 25% of the exam
Why do group insurers require a minimum participation percentage (often 75% for contributory plans, 100% for non-contributory)?
- ABecause tax rules require a minimum participation before group premiums become deductible
- To prevent anti-selection: if only the least healthy join, claims exceed pricing assumptions
- CTo increase the commission payable, which is calculated on the number of enrolled members
- DTo simplify billing, since a single group premium is easier to collect than many individual ones
Correct answer: B) To prevent anti-selection: if only the least healthy join, claims exceed pricing assumptions
Participation requirements ensure a spread of risk. Non-contributory plans require all eligible employees; contributory plans require a high minimum.
Why the other options are wrong
- ATax rules do not set participation minimums.
- CParticipation is a risk control.
- DBilling is unaffected.
Exam tip
Participation minimums fight anti-selection: 100% non-contributory, ~75% contributory.
Common mistake
Designing a voluntary plan without meeting participation minimums.
What this tests
CISRO competency component 3.1 — Implement a recommendation adapted to the client's needs and situation — which is weighted at 25% of the Accident & Sickness module. Written against the published curriculum.
More from component 3
- An underwriter assigns a disability applicant to occupational class 2 rather than class 4. The practical effect is that:
- A disability applicant discloses a back condition that resolved four years ago with no recurrence. The likely underwriting outcome is:
- Financial underwriting for an individual disability application exists to:
- A critical illness applicant's mother and sister both had breast cancer before fifty. The underwriter is likely to:
- An applicant for long-term care coverage is seventy-two. The insurer is most likely to require:
- Group long-term disability coverage within the non-evidence maximum is issued without individual medical questions because:
Practice the whole Accident & Sickness module
Timed sets weighted like the exam, and review of every question you miss. Free to start.