The competition regulator has cleared IAG’s proposed $855 million acquisition of the RACQ insurance business. 

The Australian Competition and Consumer Commission found other suppliers of home and contents and motor cover would create a competitive constraint on IAG after the purchase. 

“Several alternative suppliers ... including the market leader Suncorp, more established insurers Allianz and QBE, and newer entrants such as Youi, Auto & General and Hollard will continue to compete in Queensland,” commission chair Gina Cass-Gottlieb said. 

The ACCC found RACQ Insurance has not been a vigorous competitor in recent years and it has been losing market share since 2019. 

“While RACQI has strong brand recognition in Queensland, our review found that it does not differentiate in terms of price or coverage,” Ms Cass-Gottlieb said. 

“Its prices are generally higher than many alternative suppliers, and ... it does not meaningfully differentiate on coverage or service offering in the supply of home and contents insurance and motor insurance.”  

The decision finds RACQ has faced challenges providing competitive insurance, serving some areas of higher natural hazard risk and having limited access to capital as a mutual organisation. 

The proposed deal is unlikely to substantially reduce competition in the smash repair services, windscreen repair and replacement, and building repair markets, the commission adds. 

The regulator is still reviewing Allianz Australia’s planned purchase of RAA Insurance and says it is aware of IAG’s proposed acquisition of RAC Insurance. 

“This decision in relation to IAG and RACQ should not be treated as being indicative of the ACCC’s decision or further consideration of these transactions,” it says. 

IAG will acquire 90% of the shares in RACQ Insurance under the deal announced last November, with an option to acquire the additional 10% from the motoring club after two years. The two organisations will also enter into a 25-year distribution agreement. 

IAG CEO Nick Hawkins says the ACCC’s decision is an important milestone towards IAG and RACQ partnering to protect Queenslanders.

“As we outlined when we announced the strategic alliance in November last year, RACQ will maintain brand and customer relationships, while leveraging IAG’s scale, financial strength, best-in-class technology for claims, policies and pricing, customer-oriented claims experience and underwriting expertise,” he said.