IAG’s proposed acquisition of RAC Insurance is likely to substantially reduce competition in the motor and home and contents markets in WA, regulators say in a preliminary view.

RAC has a significantly larger share of the state’s motor and home markets than other insurers, according to the Australian Competition and Consumer Commission.

“RACI competes strongly in WA with its well-recognised brand and focus on customer service,” commissioner Philip Williams said today.

“It also appears likely to continue to compete strongly in the future, if the proposed acquisition does not eventuate.

“We are concerned that the acquisition would increase concentration in an already highly concentrated market.”

The ACCC has released a statement of issues and has invited submissions by September 18. It anticipates making a final decision on the deal on November 27.

The regulator is concerned less competition may enable IAG to increase premiums and reduce the quality of its own and RAC’s motor and home insurance products.

It is also fears the deal may enable IAG to limit rival insurers’ access to quality and cost-effective repairers in WA, or increase rivals’ costs of acquiring repair services.

IAG announced the proposed $1.35 billion takeover of the RAC underwriting operations – along with a 20-year distribution agreement – in May.

The insurer says it will continue to engage with the regulator on matters raised in the statement of issues.

“We are committed to partnering with RAC to serve and protect more Western Australians and welcome the further consultation that will now occur,” IAG CEO Nick Hawkins said. 

“We continue to believe the alliance with RAC builds on our shared heritage as mutuals, and strong sense of customer and community.”

The statement of issues is available here.