The competition regulator has cleared IAG’s $855 million acquisition of RACQ Insurance after finding the Queensland business was “not a particularly vigorous competitor in recent times” and has been losing market share.

“While RACQI has strong brand recognition in Queensland, our review found that it does not differentiate in terms of price or coverage,” Australian Competition and Consumer Commission chair Gina 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 ACCC also found several alternative suppliers including Suncorp, Allianz and QBE – plus newer entrants such as Youi, Auto & General and Hollard – will continue to compete in Queensland.

It considered industry challenges such as increasing extreme weather events and rising reinsurance and regulatory costs, and noted RACQ services some higher natural hazard risk areas and has limited access to capital as a mutual organisation.

The finding rejected concerns over impacts for smash repair services, windscreen repair and replacement, and building repairs.

“IAG is unlikely to have the ability to diminish prices or supply terms after the acquisition due to its position in the market relative to other insurers and acquirers of these services.”

The deal, which includes a 25-year distribution agreement, is expected to add about $1.3 billion in gross written premium to IAG.

IAG CEO Nick Hawkins says RACQ will maintain brand and customer relationships, while leveraging the major insurer’s scale, financial strength, technology for claims, policies and pricing, customer-oriented claims experience and underwriting expertise. 

RACQ CEO David Carter says the ACCC clearance is a “great first step” in the regulatory process, with completion expected in the third quarter pending other requirements. 

“We are just as confident today as we were when we announced the partnership in the benefits that will come from our two organisations working together,” Mr Carter said. 

The Motor Trades Association of Australia says the deal is an “assault on competition”, and consolidation puts pressure on independent and family-run repairers.

It has also opposed an Allianz move to acquire the insurance business of RAA, and IAG’s plan to purchase the RAC underwriting business.

“Consumers may continue to see trusted local brands, but the reality behind the scenes is a corporate takeover,” association interim executive director Rod Camm said. “These arrangements ruthlessly strip decision-making away from locally accountable institutions and hand control to national corporate agendas that prioritise profits over people.”

The ACCC is continuing to consider the RAA transaction, with a decision delayed from last Thursday, and will also look at the RAC deal.

“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 said last week.