The Australian Competition and Consumer Commission has opposed IAG’s planned $1.35 billion purchase of WA’s RAC Insurance, but the company will continue to pursue deal approval through a new public interest avenue introduced this year.  

ACCC chair Gina Cass-Gottlieb says the regulator conducted extensive inquiries and analysed material provided by IAG, RAC and third parties such as other insurers and industry associations to examine the likely impacts on competition.

“The acquisition would combine two large insurers, resulting in a substantial increase in IAG’s market share and a significant increase in market concentration,” Ms Cass-Gottlieb said. 

“If the acquisition were to proceed, we consider the level of constraint from other insurers would be unlikely to be sufficient to address the loss of competition arising from the acquisition.” 

It found the proposed deal would leave IAG with overall market shares in WA of approximately 55% to 65% in motor vehicle and about 50% to 60% in home and contents. 

Under the new merger regulation regime, if the ACCC decides not to approve an acquisition, the parties can lodge an additional public benefit application and the regulator then has 50 business days to make a decision, subject to any extensions. 

IAG confirmed this morning that it would make a public benefits application, which provides an opportunity for the broader benefits of the alliance to be assessed alongside competition considerations 

“The RAC IAG partnership will create long-term benefits for members, customers and communities across Western Australia through IAG’s advanced technology platforms, claims management expertise, financial stability and global reinsurance protection,” CEO Nick Hawkins said. 

“RAC will remain local and we’ll invest in enhancements to benefit the member experience, and continue to deliver high-quality, competitive insurance products and services."

The ACCC had already raised concerns about the deal in April, before it progressed to a more detailed second phase review.

The phase two determination can be read here.