The Australian Competition and Consumer Commission (ACCC) has today announced it will not oppose IAG buying Wesfarmers’ underwriting business.
The ACCC says it has closely reviewed the proposed acquisition as IAG and Wesfarmers are the first and fifth or sixth-largest general insurers in Australia, respectively, and the largest suppliers of rural insurance products.
For the home insurance and domestic motor insurance markets, the ACCC considered whether the proposed acquisition would remove a vigorous and effective competitor. Wesfarmers’ underwriting of these personal insurance products sold via Coles is currently small but growing. The ACCC determined that other competitors including the banks and ‘challenger’ brands such as Woolworths are likely to have a similar ability to provide strong price-based competition for home and motor insurance.
Also, Coles will continue to offer consumers insurance products via its supermarkets and online, underwritten by IAG in accordance with the terms of a 10-year distribution agreement. The ACCC reviewed this agreement, with particular reference to arrangements for pricing and benchmarking to competitors. The ACCC determined that, while the proposed acquisition removes an independent underwriter from the markets, at the retail level the proposed acquisition is unlikely to materially change competitive dynamics.
“The ACCC concluded that the proposed acquisition is unlikely to substantially lessen competition in any insurance market or in relation to IAG’s acquisition of smash repairs or windscreen replacement services,” Mr Sims said.
“Therefore, the ACCC has decided not to oppose the proposed acquisition.”
Wesfarmers underwrites insurance sold through established brands including Wesfarmers Federation Insurance (WFI), Lumley and Coles Insurance. WFI is a significant rural and business insurer dealing directly with clients and via intermediaries, Lumley specialises in intermediated commercial and rural insurance products, and Coles Insurance offers car and home insurance to consumers through Coles supermarkets and online.
The ACCC’s public consultation process directed inquiries to a wide range of interested parties including rival insurers, brokers, smash repairers, and relevant industry associations including many representing primary producers.
The ACCC reviewed internal company documents from both IAG and Wesfarmers. The Australian Prudential Regulation Authority (APRA), the insurance industry regulator, also assisted the ACCC’s investigations. In addition, the ACCC liaised with New Zealand’s competition authority, the New Zealand Commerce Commission, which is continuing to review the proposed acquisition.