You are responsible for pricing a book of business which includes Corporate Motor business. A senior Motor underwriter has emailed you to ask for an opinion on a case he would like to quote for. He has provided you with the following information: A broker has come to us with a policy which is due for renewal at 1st April. This is for a Fleet of 850 vehicles, which is to cover the Motor business of a large UK retailer where we already hold the connected Property and Liability business but the Motor book is with a competitor. The competitor has already quoted 1.6m for the Motor renewal. The customer has been pleased with the service he has received from Ford on his Property and Liability book and may be prepared to pay a small premium increase to move his Motor business to Ford. The actual historic claims experience for this particular case is summarised in the following table: Start End 01/09/2016 31/08/2017 01/09/2017 31/08/2018 01/09/2018 31/08/2019 Policy Period 01/09/2019 31/03/2020 01/04/2020 31/01/2021 A A B B Exposure (Vehicle Years) 304 311 498 348 729 Policy Policy End Vehicle Date Vehicle Policy Start Date Date Number Added Claim Frequency per Exposure Average Cost per Claim Number of Claims 01/01/2021 31/12/2021 01/01/2021 31/12/2021 01/01/2021 30/09/2021 01/01/2021 30/09/2021 49 51 97 82 102 Own Vehicle Third Party Damage Cost Damage Cost An individual vehicle exposure (vehicle year) is defined as the proportion of the year (from the policy start date) that a vehicle is on cover for. The below table gives a brief example of the calculation for understanding. 29,000 27,000 1 01/01/2021 01/04/2021 2 1 01/01/2021 2 01/01/2021 51,000 57,000 49,000 78,000 82,000 180,000 171,000 174,000 Third Party Injury Cost 31/12/2021 31/12/2021 30/09/2021 30/06/2021 116,000 152,000 227,000 257,000 287,000 Date Vehicle Number Of Vehicle Removed Days On Cover Year 365 275 273 181 1 0.75 0.75 0.50 Running the business through our standard pricing models in order to calculate expected results gives the following outputs: Own Vehicle Damage Third Party Damage Small Third Party Injury Large Third Party Injury 18.0% 780 14.0% 2,600 9.0% 5,200 0.13% 288,000 You also know that we have expenses of 240 per claim for claims handling expenses, 12% of premium for management expenses, and we will pay the broker 50k commission for this case. Our capital requirement is 70% of claim costs, and our business plans require 10% return on our capital. Questions Please prepare a presentation that covers the following: What do you think the expected claim cost is per vehicle, according to our pricing models? How does this compare to the actual claims experience observed over the last 5 years? What do you think might explain any discrepancy? . Are there any clear trends in the risk, or in the claims experience, over the last 5 years? What do you think might have caused these? What would be your estimate of the claims cost for the coming year? How much premium do you think we should charge for the risk? Do you think we can be competitive with the price the competitor is offering? Is there any further information you would require before making a final recommendation?