‘There’s enough competition’: ACCC approves IAG’s $855m acquisition of RACQ Insurance

Insurance Australia Group (ASX: IAG) has been given the green light by the competition watchdog to proceed with its $855 million acquisition of RACQ Insurance.

The Australian Competition and Consumer Commission (ACCC) says it will not oppose the deal which was announced in November last year, reasoning that there are alternative suppliers of home and contents insurance and motor insurance who would continue to compete with IAG after the acquisition.

The ACCC notes that while the companies provide general insurance products, including home and contents insurance and motor insurance, they predominantly overlap in the supply of insurance products in Queensland.

“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,” says ACCC chair Gina Cass-Gottlieb.

The ACCC’s investigation also found RACQ Insurance has been losing market share since 2019 and has not been a “particularly vigorous” competitor in recent years.

“While RACQI has strong brand recognition in Queensland, our review found that it does not differentiate in terms of price or coverage,” says Cass-Gottlieb.

“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.”

The competition regulator also considered the current challenges faced by the insurance industry, including an increase in extreme weather events and rising reinsurance and regulatory costs, and particularly how these challenges affected RACQ 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,” says Cass-Gottlieb.

“These challenges have placed limitations on its capacity to compete.”

IAG has welcomed the announcement which is similar to the $1.35 billion deal struck with The Royal Automobile Club of Western Australia (RAC) last week.

Under that deal, IAG is paying $400 million for control of RAC Insurance and $950 million for an exclusive 20-year distribution and brand licensing agreement as part of a strategic alliance with the RAC to provide general insurance products and services for RAC members and Western Australians.

The deal for RACQ Insurance includes a 25-year exclusive strategic alliance with RACQ (Royal Automobile Club of Queensland) which has more than 1.7 million members.

“As we outlined when we announced the strategic alliance in November last year, 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,” says Nick Hawkins, the CEO of IAG.

 RACQ’s CEO David Carter describes the ACCC’s ruling as “a great first step in the regulatory process and recognises the benefits that would come from the two organisations working together as part of a 25-year strategic partnership agreement”.

“We are just as confident today as we were when we announced the partnership, in the benefits that will come from our two organisations working together,” says Carter.

The acquisition will boost IAG’s gross written premiums by about $1.3 billion once it settles in the third quarter of calendar 2025.

The deal will see IAG initially acquire 90 per cent of the shares of RACQ Insurance with an option to buy the remaining 10 per cent on “consistent terms” two years after the acquisition is completed.