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ACCC fears Aon-WTW merger may affect broking competition

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The proposed merger of Aon and Willis Towers Watson (WTW) could lead to adverse outcomes including higher charges for businesses that need specialised risk service from brokers, according to the competition watchdog.

The tie-up is also likely to lead to a less competitive commercial insurance broking sector, leaving the market controlled by the merged entity and Marsh, the Australian Competition and Consumer Commission (ACCC) says.

Complex or high-value commercial insurance customers may receive reduced service levels too as a result of the merger.

The ACCC aired its “preliminary concerns” last week and has released a Statement of Issues seeking further feedback about the impact of the Aon-WTW union on the commercial broking sector.

The Statement of Issues follows a probe launched last October by the regulator to look into the merger, which is slated for completion in the first-half of this year.

ACCC says at the moment Aon, WTW and Marsh are the only three major brokers capable of providing commercial risk broking to large customers, reinsurance broking and employee benefits services in Australia.

“We are concerned that the combination of Aon and WTW will remove a significant competitive constraint from the markets for commercial risk broking to large customers or those with more complex and/or high-value insurance premiums; reinsurance broking; and employee benefits broking in Australia,” Commissioner Stephen Ridgeway said.

The concerns extend to reinsurance broking and employee benefits broking as well, he said.

“Reinsurance is vital for the Australian economy as it enables insurers to continue to write new insurance policies,” Mr Ridgeway said. “The ACCC is concerned that the proposed merger will reduce insurers’ choice of reinsurance brokers in an already concentrated market.

“This could lead to price increases or reduced service levels for customers, including the ability to access sufficient reinsurance capacity.”

The ACCC is concerned also that smaller brokers will be impacted by the impending tie-up between the broking giants. It says the move may limit the insurance coverage and pricing that other brokers are able to obtain for their customers.

It fears the merger may increase the risk of “coordinated effects” in the markets where Aon and WTW compete.

ACCC says the Statement of Issues is not a final decision about the proposed merger. It is a statement outlining the regulator’s preliminary views and identifies further lines of inquiry.

Closing date for submissions to the Statement of Issues is March 12. The ACCC has set May 27 as the proposed date to announce its final view.

Click here for the Statement of Issues.