CFP CFP InsurTech & Lending Technology 1 — Questions and Answers
Question 1: What is 'InsurTech' in the context of financial technology?
- Insurance sold exclusively through mobile apps
- The use of technology innovations to improve the efficiency of the insurance industry (Correct answer)
- A government program insuring fintech startups
- Automated claim processing software only
Correct answer: The use of technology innovations to improve the efficiency of the insurance industry
InsurTech refers to the use of emerging technologies such as AI, IoT, and big data to disrupt and improve the traditional insurance value chain.
Question 2: Which technology allows InsurTech companies to use real-time driving data to price auto insurance policies?
- Blockchain smart contracts
- Telematics and IoT devices (Correct answer)
- Robotic process automation
- Natural language processing
Correct answer: Telematics and IoT devices
Telematics devices collect real-time data on driving behavior (speed, braking, mileage) to enable usage-based insurance pricing models.
Question 3: What is 'peer-to-peer (P2P) insurance' in InsurTech?
- Insurance sold between individuals without an intermediary
- A model where groups of people pool premiums to cover each other's claims (Correct answer)
- Blockchain-based reinsurance contracts
- Employer-sponsored group health plans
Correct answer: A model where groups of people pool premiums to cover each other's claims
P2P insurance pools premiums from small groups of individuals with similar risk profiles, with unused funds returned to members at year-end, reducing moral hazard.
Question 4: What is the primary advantage of using machine learning in credit underwriting for lending fintechs?
- Eliminating the need for credit scores entirely
- Analyzing thousands of data points to improve risk prediction accuracy (Correct answer)
- Automatically approving all loan applications
- Reducing interest rates for all borrowers
Correct answer: Analyzing thousands of data points to improve risk prediction accuracy
Machine learning enables lending fintechs to analyze diverse data sources beyond traditional credit scores, improving risk prediction and expanding access to credit.
Question 5: What does 'marketplace lending' (also called peer-to-peer lending) refer to in fintech?
- Banks lending to each other overnight
- Online platforms matching borrowers directly with individual or institutional investors (Correct answer)
- Credit unions offering personal loans online
- Government-backed small business loan programs
Correct answer: Online platforms matching borrowers directly with individual or institutional investors
Marketplace lending platforms like LendingClub connect borrowers seeking loans with investors seeking returns, bypassing traditional bank intermediaries.
Question 6: Which U.S. federal law prohibits discriminatory lending practices that disproportionately harm protected classes?
- Truth in Lending Act (TILA)
- Equal Credit Opportunity Act (ECOA) (Correct answer)
- Fair Debt Collection Practices Act (FDCPA)
- Community Reinvestment Act (CRA)
Correct answer: Equal Credit Opportunity Act (ECOA)
The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against applicants based on race, color, religion, national origin, sex, marital status, or age.
CFP CFP InsurTech & Lending Technology 1
What is 'InsurTech' in the context of financial technology?