Insurance Australia Group’s (IAG’s) acquisition of RACQ Insurance Limited (RACQI) can go ahead. The Australian Competition and Consumer Commission (ACCC) has announced that it will not oppose the giant trans-Tasman insurer’s buyout of the Queensland firm.
In a media release this morning, the regulator said both firms already overlap in their supply of insurance products including home and contents and motor insurance in Queensland.
The ACCC found that the acquisition is “unlikely to substantially lessen competition in these markets.” IAG, said the release, is unlikely to have the ability to diminish prices or supply terms “due to its position in the market relative to other insurers.”
“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,” said ACCC chair Gina Cass-Gottlieb (main picture) in the release.
The regulator also said that RACQI “has not been a particularly vigorous competitor in recent times” and referred to its decreasing market share since 2019.
“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,” said Cass-Gottlieb.
The release said the ACCC also considered challenges faced by the insurance industry, including extreme weather events and rising reinsurance and regulatory costs. The regulator also looked at RACQI’s limited access to capital as a mutual.
“These challenges have placed limitations on its capacity to compete,” said the chair.
IAG welcomed the decision.
“RACQ will maintain brand and customer relationships, while leveraging IAG’s scale, financial strength, best-in-class technology for claims, policies and pricing, customer orientated claims experience and underwriting expertise,” said CEO Nick Hawkins in a release.
However, the insurer’s release noted that the acquisition’s “strategic alliance” requires the completion of other approvals, including under the Financial Sector (Shareholdings) Act (FSSA).
