Risk Assessment & Underwriting Flashcards
7 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 7 Risk Assessment & Underwriting flashcards as text
Under the FCRA, when a fintech lender uses an alternative data model to deny credit, what is the applicant's right?
Answer: Right to receive an adverse action notice listing the key factors
FCRA and Regulation B require adverse action notices that disclose the principal reasons credit was denied, even when AI models are used.
A fintech insurer prices cyber liability policies using real-time network vulnerability scans. This is BEST described as:
Answer: Dynamic risk-based pricing
Dynamic risk-based pricing adjusts premiums in real time based on current risk signals rather than static actuarial tables.
Which metric BEST measures the financial cost of misclassifying a defaulting borrower as creditworthy in an underwriting model?
Answer: False negative rate
A false negative (bad borrower approved) represents the cost of missed default risk, which is the primary credit loss concern in underwriting.
In insurance underwriting, what does 'moral hazard' specifically refer to in the context of fintech-enabled parametric policies?
Answer: The risk that the insured takes on more risk because they are protected
Moral hazard occurs when insurance coverage reduces the insured's incentive to avoid the insured risk, a persistent concern even in automated parametric products.
A BNPL provider assesses creditworthiness at checkout in under 2 seconds. Which approach makes this speed possible while maintaining risk accuracy?
Answer: Pre-scored decisioning models using cached bureau data and behavioral signals
Pre-scored models with cached data and real-time behavioral inputs enable millisecond decisioning without sacrificing predictive accuracy.
Which concentration risk scenario would be MOST concerning for a fintech marketplace lender's loan portfolio?
Answer: 80% of loans originated to gig economy workers in a single platform
Heavy concentration in a single borrower segment and platform creates correlated default risk if that platform suffers disruption or sector downturn.
What is the key advantage of using a scorecard model over a black-box neural network in consumer credit underwriting for a US lender?
Answer: Greater interpretability supporting adverse action reason codes
Scorecard models produce interpretable point contributions per variable, making it straightforward to generate FCRA-compliant adverse action reason codes.