The Australian Competition and Consumer Commission (ACCC) has voiced preliminary concerns regarding Insurance Australia Group’s (IAG) proposed acquisition of RAC Insurance from the Royal Automobile Club of Western Australia. IAG, the largest insurer in the country, announced its intention to acquire RAC Insurance for $1.35 billion in May. IAG provides a range of general insurance products, including home, car, and business insurance. RAC Insurance offers motor insurance, as well as home and contents insurance to its members in Western Australia.
The ACCC’s primary worry is that the proposed acquisition would substantially lessen competition within Western Australia’s insurance market. This is because the acquisition would result in IAG underwriting both motor and home and contents insurance under the well-recognised RAC brand. The regulator believes that reduced competition could allow IAG to restrict rival insurers’ access to quality and cost-effective repairers or inflate the cost of repair services, a crucial element in providing insurance.
ACCC Commissioner Philip Williams stated that RAC Insurance currently competes vigorously in Western Australia, leveraging its strong brand and customer service focus. He added that RAC Insurance is likely to maintain its competitive stance in the future should the proposed acquisition not proceed. The ACCC is particularly concerned that the acquisition would further consolidate an already highly concentrated market.
The ACCC intends to continue its investigation and is seeking further information from market participants. A final decision on whether to approve the acquisition will be made after considering all relevant factors and submissions.
