CFP InsurTech & Lending Technology Flashcards
6 cards from real CFP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CFP InsurTech & Lending Technology flashcards as text
What is 'alternative credit scoring' and why is it significant for fintech lenders?
Answer: Using non-traditional data sources like rent, utility payments, and cash flow to assess creditworthiness
Alternative credit scoring expands access to credit for 'credit invisible' consumers by incorporating non-traditional data beyond the standard FICO score.
Which U.S. regulation requires lenders to disclose the annual percentage rate (APR) and key loan terms to borrowers?
Answer: Truth in Lending Act (TILA) / Regulation Z
TILA (implemented by Regulation Z) requires lenders to clearly disclose the APR, finance charges, and total payment amounts before a consumer enters into a credit agreement.
What is 'loss ratio' in insurance, and why is it critical for InsurTech profitability?
Answer: The ratio of claims paid to premiums earned, indicating underwriting profitability
A loss ratio above 100% means an insurer is paying out more in claims than it earns in premiums, making underwriting profitability a key metric for InsurTech viability.
What is 'digital mortgage lending' and its primary benefit for borrowers?
Answer: An end-to-end online mortgage application, processing, and closing process that reduces time and cost
Digital mortgage platforms streamline the application, underwriting, and closing process, reducing approval times from weeks to days and lowering origination costs.
What is 'claims automation' in InsurTech?
Answer: Using AI and straight-through processing to evaluate and pay eligible claims without human intervention
Claims automation uses AI, image recognition, and rules engines to process straightforward claims instantly, improving customer experience and reducing operational costs.
What does the CFPB's 'adverse action notice' requirement mean for fintech lenders using AI models?
Answer: Lenders must provide specific reasons for denial or unfavorable terms even when an AI model makes the decision
Under ECOA and FCRA, lenders must provide specific, principal reasons for adverse credit decisions — AI 'black box' models must be explainable enough to generate compliant notices.