The Australian Competition and Consumer Commission (ACCC) has announced its opposition to Insurance Group of Australia Ltd’s (IAG) proposed acquisition of RAC Insurance Pty Limited (RACI) from the Royal Automobile Club of Western Australia, citing concerns that the transaction could result in a significant reduction in competition for the supply of motor vehicle, home and contents insurance in Western Australia.
The ACCC noted that RACI is the market leader in motor vehicle and home and contents insurance in Western Australia, competing strongly on the basis of its widely recognized RAC WA brand, competitive pricing and high-quality service, including claims experience.
At the same time, IAG, one of Australia’s two largest personal insurance companies, also performed strongly in Western Australia with its well-known NRMA brand, strong IT capabilities and strong financial resources.
“The proposed acquisition would combine the two large insurance companies, giving IAG a market share of approximately 55 to 65 per cent of the Western Australian motor vehicle insurance market and approximately 50 to 60 per cent of the home and contents insurance market,” the ACCC said.
ACCC Chair Gina Cass-Gottlieb commented: “We conclude that the proposed acquisition will eliminate significant competition between IAG and RACI and reduce the competitive pressure each imposes on rival insurance brands.
“We conclude that the acquisition may allow IAG to increase premiums and reduce the quality of its suite of insurance products following the acquisition of RACI, and may have knock-on effects on the products of other insurers.”
Cass-Gottlieb continued: “Given the historical difficulties competitors have had in growing share in Western Australia, the ACCC is concerned that IAG will face insufficient competitive constraints following the acquisition.
“Our investigation found that RACI remains a strong and profitable competitor and is well-positioned to meet these challenges. We conclude that if IAG does not acquire RACI, RACI will be able to continue to compete effectively in Western Australia in the future.”
In response, the IAG acknowledged the ACCC’s decision to oppose its proposed strategic alliance with the RAC to provide general insurance products and services to RAC members and Western Australians.
IAG now intends to apply to the ACCC to have the alliance assessed under the new mandatory merger control regime, which will come into effect on January 1, 2026.
IAG Managing Director and CEO Nick Hawkins said the alliance would enhance the RAC member experience and ensure increased capabilities to address industry challenges for the benefit of Western Australians.
Hawkins added: “IAG and RAC have a successful track record of working together and are committed to providing all West Australians with competitive and accessible insurance products.
“As part of the alliance, we are committed to staying local, investing in enhancing the RAC member experience and continuing to provide high quality and competitive insurance products and services.
“This will be achieved through our position as a national insurer, investment in technology capabilities and strong capital management. Together we will also continue to invest in initiatives that support local communities and deliver benefits to the RAC, its members and Western Australia.”