Insurance Australia Group (IAG) is making another attempt to acquire RAC Insurance in Western Australia, triggering a renewed competition assessment by the Australian Competition and Consumer Commission (ACCC).
The proposed transaction would see IAG purchase 100 per cent of RAC Insurance Inc (RACI) from the Royal Automobile Club of Western Australia and enter a 20-year distribution agreement with RAC. Under the arrangement, RAC would continue to offer insurance products to its members under the RAC brand, while the policies would be underwritten by IAG.
The ACCC is currently reviewing the proposed acquisition and has sought feedback from industry participants and stakeholders about the potential impact on competition in the Western Australian insurance market. The regulator is particularly interested in the supply of motor insurance and home and contents insurance in the state.
As part of the process, the ACCC has distributed a questionnaire asking businesses to outline their views on how closely IAG and RAC Insurance currently compete and whether the proposed merger could reduce competition. It is also examining whether the transaction could allow the combined entity to increase premiums, reduce coverage, limit product choice or diminish service levels.
The regulator has also requested information about the potential impact on the insurance supply chain, including smash repairers, windscreen repair providers and building repair services. The ACCC is assessing whether the combined IAG and RAC Insurance business could gain greater bargaining power over repair networks or restrict rival insurers’ access to those services.
The renewed process follows a previous attempt by IAG to secure approval for the acquisition under Australia’s merger regime. The company is now reapplying under the new mandatory merger framework, which requires formal ACCC clearance before large transactions can proceed.
IAG chief executive Nick Hawkins recently confirmed during the company’s half year results webinar that the insurance giant remains committed to the proposed partnership with RAC, describing it as an opportunity to strengthen the WA insurer while maintaining its strong local brand.
“We’re committed to the alliance with RAC, which would see it maintain its highly regarded local brand and WA-based services while strengthening the business through our technology, global reinsurance arrangements and scale,” Hawkins said.
RAC Insurance is a major player in Western Australia’s motor and home insurance markets, serving members of the state’s largest motoring organisation.
The ACCC has invited submissions on the proposal, with responses due by 12 March as part of its ongoing assessment of the deal’s potential impact on competition.