3. Your competitive intelligence team has notified you that competitors have started using sod type in pricing home insurance. Houses with fescue lawns have losses that are 20% higher than those with Kentucky blue grass. Competitors begin charging 5% more for fescue and 5% less for blue grass. You study the segments and find that the fescue owners are more elastic. Given these values: fescue BG quotes 1000 1000 close rate at competitive position of 1 10% 10% Previous prices (you and competition) $300 $300 Actual losses and expenses $300 $250 New competitor price $315 $285 Elasticity 3.0 1.5 a. What happens to profit and volume if you do nothing in reaction to your competitors' changes? (Note: A competitor dropping price is like you raising it. Use % price change (price differential)/300.) b. Should you implement a sod factor in your rating plan? c. What factors should you use if you want to maximize volume while maintaining original profit levels? d. Assuming regulators are fine with sod type as a rating variable, could you support the factors you selected in c?