The Australian Competition and Consumer Commission (ACCC) has given the green light for Insurance Australia Group’s (IAG) proposed acquisition of RACQ Insurance Limited (RACQI).
In a statement issued on 22 May, the watchdog said it “will not oppose” the proposed deal.
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The regulatory body review centred on the deal’s potential effects on the home, contents, and motor insurance markets and indicated that the acquisition is “unlikely to substantially lessen competition”.
It also highlighted RACQI’s waning competitiveness and market share loss since 2019.
The commission considered the alternative scenario of RACQI remaining independent, including the broader industry challenges such as more frequent extreme weather events and escalating reinsurance and regulatory expenses.
The ACCC also examined the acquisition’s implications for related service markets, including smash repair, windscreen replacement, and building repair services.
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By GlobalDataThe conclusion was that IAG’s market position would not allow it to significantly influence pricing or supply conditions in these sectors.
As part of the acquisition agreement, IAG will secure 90% of RACQI’s shares from The Royal Automobile Club of Queensland Limited (RACQ), with an option to acquire the remaining shares after two years.
The deal excludes RACQ’s membership-based business, including roadside assistance.
ACCC Chair Gina Cass-Gottlieb said: “Several alternative suppliers of home and contents insurance and motor insurance, including the market leader Suncorp, more established insurers Allianz and QBE, and newer entrants such as Youi, Auto & General, and Hollard will continue to compete in Queensland.”
“While RACQI has strong brand recognition in Queensland, our review found that it does not differentiate in terms of price or coverage. Its prices are generally higher than many alternative suppliers, and that it does not meaningfully differentiate on coverage or service offering in the supply of home and contents insurance and motor insurance.”
“RACQI faces material challenges in continuing to provide competitive insurance due to it serving some areas of higher natural hazard risk, and limited access to capital as a mutual organisation. These challenges have placed limitations on its capacity to compete.”
