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The national competition watchdog has come out against a proposed $1.35 billion merger between Insurance Australia Group and RAC WA’s insurance arm, flagging concerns about its impact on motor vehicle and home and contents insurance options in WA.
In its decision to oppose the move, released on Thursday, the Australian Competition and Consumer Commission claimed the acquisition would leave IAG with as much as a 65 per cent share for motor vehicle insurance in the WA market.
The ACCC took a dim view of a proposed merger between IAG and RAC WA’s insurance arm.Credit: WAtoday
ACCC chair Gina Cass-Gottlieb said the acquisition would eliminate the “significant competition” between the insurance companies, and impact the competitive pressure they each placed on rival brands.
“We concluded that the acquisition would be likely to allow IAG, after acquiring RACI, to increase premiums and reduce the quality of its suite of insurance products, with likely flow-on effects to the offerings of other insurers,” she said.
“Given the historical difficulties rivals have had growing their share in Western Australia, the ACCC is concerned that IAG would face insufficient competitive constraints post-acquisition.”
Cass-Gottlieb said the ACCC also looked at the level of competition RACI would provide, as well as the challenges faced by the insurance industry, and found it was “adequately positioned to manage these challenges”.
In a statement, RAC said it was “naturally disappointed” in the ACCC’s opposition to the acquisition, but vowed to push ahead.
“IAG have announced their intentions to submit the proposed partnership for assessment under the ACCC’s new mandatory control regime, which commences 1 January 2026,” the statement read.
“RAC remains committed to pursuing the partnership and supports this next step.”
IAG managing director and chief executive Nick Hawkins said the insurers had committed to “staying local” as part of the companies’ partnership.
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“This would be made possible by our position as a national insurer, investment in technology capabilities and strong capital management,” he said.
“Together, we would also continue to invest in initiatives that support local communities and provide benefits to RAC, its members and Western Australia.”
The insurers inked the deal in May, which would have seen IAC acquire RAC Insurance for $400 million, and spend $950 million on a 20-year distribution and licensing agreement.
IAG would have taken over underwriting, claim management, product development and pricing, but claims would be processed in Perth.
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