The public benefits of IAG’s proposed acquisition of RAC Insurance are unlikely to outweigh negative impacts, the competition regulator says in a preliminary assessment of additional commitments made by the would-be buyer.

While there are likely to be some benefits, the parties have probably “overstated the magnitude” and underestimated the time required for their realisation, according to the Australian Competition and Consumer Commission.

“Based on the material before it, the ACCC’s preliminary view is that there is unlikely to be a net public benefit from the acquisition, as the public benefits are likely to be outweighed by the detriment to the public.”

In September, the regulator opposed the transaction because it could substantially reduce competition in the WA home and motor markets. IAG then made a public benefits application that included added commitments.

The ACCC has given the insurer until December 1 to respond to issues raised in its preliminary assessment and will make a final decision by February 1.

IAG says it remains confident the strategic alliance will deliver long-term benefits for customers and communities across WA, and it “disagrees with the preliminary view” of the regulator.

“IAG will continue to engage constructively as the process progresses,” it said.

The insurer has committed to offering RAC-branded products north of the 26th parallel, where cover is harder to obtain; proposed selling its NRMA Insurance home and motor portfolio renewal rights in WA; and promised community investment.

But the ACCC says IAG already operates in the north, so there is no increase in competition, while the renewal proposal has material execution risk, uncertain customer retention and inadequate post-sale protections.

RAC and IAG both invest in community programs and activities, regulatory compliance cost savings are unlikely to be significant, operational benefits are likely to be small and technology benefits are uncertain in magnitude and timing, it says.

The regulator recognises reinsurance program benefits in the case of a catastrophic event or series of major WA incidents that RAC cannot cover, but it sees a low probability of that happening and says the organisation has a strong existing reinsurance and capital position.

IAG and RAC have indicated they will take their case to the Australian Competition Tribunal if the ACCC continues to oppose the transaction.