The ACCC has outlined its preliminary competition concerns with Insurance Australia Group Limited's (ASX: IAG) proposed acquisition of RAC Insurance Pty Limited (RACI) from the Royal Automobile Club of Western Australia Inc in a Statement of Issues published today.
IAG and RACI both supply motor insurance and home and contents insurance in Western Australia. The proposed acquisition would result in IAG underwriting motor insurance and home and contents insurance under the RAC brand.
The ACCC's preliminary view is that the proposed acquisition is likely to have the effect of substantially lessening competition in both the supply of motor insurance and the supply of home and contents insurance in Western Australia.
"RACI is the leading provider of both motor and home and contents insurance in Western Australia and has a significantly larger market share in each compared to any other insurer," ACCC Commissioner Dr Philip Williams said.
"RACI competes strongly in Western Australia with its well-recognised brand and focus on customer service. It also appears likely to continue to compete strongly in the future, if the proposed acquisition does not eventuate."
"We are concerned that the acquisition would increase concentration in an already highly concentrated market," Dr Williams said.
The ACCC is concerned that the reduction in competition may enable IAG to increase premiums and reduce the quality of its own and RACI's motor insurance and home and contents insurance products in the future.
The ACCC is also concerned that the proposed acquisition may enable IAG to limit rival insurers' access to quality and cost-effective repairers in Western Australia or increase rivals' costs of acquiring repair services in the state.
Accessing repair services, such as smash repairs, windscreen repairs and home repairs, is a key aspect of providing insurance, and restricting access to such services would likely reduce the competitiveness of rival insurers in Western Australia.
