Why the ACCC blocked IAG's acquisition of RAC Insurance

The Australian Competition and Consumer Commission has prohibited Insurance Australia Group's proposed $1.35 billion acquisition of RAC Insurance, finding that it would substantially lessen competition in Western Australia's motor and home insurance markets.

The decision, announced on 23 September, is an early test of Australia's new mandatory merger regime. However, the transaction is not necessarily finished: IAG intends to pursue approval through a separate public-benefit assessment.

What was IAG proposing?

IAG, which owns NRMA Insurance and acquired Queensland's RACQ Insurance in 2025, proposed to buy 100% of RAC Insurance from the Royal Automobile Club of Western Australia.

The $1.35 billion arrangement comprised $400 million for the insurance company and $950 million for an exclusive, 20-year distribution and brand-licensing agreement.

IAG would underwrite RAC-branded motor and home insurance, while RAC would continue distributing policies to its Western Australian members. RAC's roadside assistance and other non-insurance businesses were excluded.

What legal restrictions apply?

Australia's merger regime changed on 1 January 2026. Acquisitions meeting prescribed thresholds must be notified to the ACCC and cannot proceed without approval.

The central legal test is whether an acquisition would, or would be likely to, substantially lessen competition.

IAG first sought informal clearance in 2025, but the ACCC opposed the proposal in December. It notified the transaction again under the new regime in March 2026.

Following an initial assessment, the ACCC commenced an in-depth Phase 2 investigation in April. Its September determination means the acquisition cannot proceed in its present form.

IAG can seek a separate public-benefit assessment within 21 calendar days. The ACCC then has 50 business days, subject to extensions, to determine whether demonstrated public benefits outweigh the transaction's likely detriments. Tribunal review is another available avenue.

Why did the ACCC reject the transaction?

The proposed market shares were central to the decision.

The combined IAG would control approximately 55–65% of Western Australian motor insurance and 50–60% of home and contents insurance. RAC is already the market leader in both markets.

But concentration alone was not the entire argument.

The ACCC found that RAC and IAG were effective competitors, with strong brands, established customer relationships and substantial operational capabilities.

Other insurers, including Allianz, QBE, Suncorp and several smaller competitors, would remain. Nevertheless, the regulator concluded they would not sufficiently constrain the combined business. Historically, competing insurers have struggled to expand their Western Australian market shares.

The ACCC also examined the alternative scenario. Despite rising claims, reinsurance and regulatory costs, it considered RAC capable of remaining an effective independent competitor.

The regulator investigated whether IAG could restrict competitors' access to smash repairers but ultimately found insufficient evidence to establish that additional competition concern. AIG and RAC argue that their partnership would provide greater financial resilience and long-term benefits for members. Their next opportunity is to demonstrate that those public benefits outweigh the competition concerns identified by the ACCC.