Insurance Australia Group Ltd (ASX: IAG) shares are lagging the broader market on Thursday.
While the ASX 200 index is up 0.7%, the insurance giant's shares are trading slightly lower at $7.82, weighed down by competition concerns raised by regulators.
So, what's going on today? Let's find out.
ACCC blocks IAG's proposed RAC Insurance acquisition
The big news dragging on investor sentiment is that the Australian Competition and Consumer Commission (ACCC) will oppose IAG's proposed acquisition of RAC Insurance (RACI) from the Royal Automobile Club of Western Australia.
In a detailed ruling, the competition watchdog concluded that the deal would likely substantially lessen competition in Western Australia's insurance market.
RACI is the market leader in both motor and home insurance in the state, while IAG, through brands such as NRMA, is already one of the state's strongest competitors.
According to the ACCC, combining the two would give IAG:
- 55% to 65% market share in motor insurance, and
- 50% to 60% market share in home and contents insurance.
These are numbers the regulator says would allow IAG to raise premiums and reduce service quality due to less competitive pressure. The ACCC's chair, Gina Cass-Gottlieb, said:
We concluded that the proposed acquisition would eliminate the significant competition between IAG and RACI, and reduce the competitive pressure they each place on rival insurance brands. We concluded that the acquisition would be likely to allow IAG, after acquiring RACI, to increase premiums and reduce the quality of its suite of insurance products, with likely flow on effects to the offerings of other insurers.
The ACCC also rejected the argument that RACI might struggle to compete in the future, adding:
Our investigation found that RACI remains a strong and profitable competitor and is adequately positioned to manage these challenges. We have concluded that if IAG doesn't acquire RACI, RACI would have the capability to continue to compete effectively in Western Australia in the future.
IAG responds
IAG has acknowledged the ACCC's decision but isn't walking away from the proposal.
The ASX 200 stock revealed that it will lodge an application under the new mandatory merger control regime, which begins on 1 January 2026.
IAG's CEO, Nick Hawkins, maintains that the alliance would ultimately benefit RAC members and the broader WA community. He said:
IAG and RAC have proven track records of successful partnerships and are committed to delivering competitive and accessible insurance products for all Western Australians. As part of the alliance we have committed to staying local, investing in enhancements to the RAC member experience and continuing to deliver high quality and competitive insurance products and services.
This would be made possible by our position as a national insurer, investment in technology capabilities and strong capital management. Together, we would also continue to invest in initiatives that support local communities and provide benefits to RAC, its members and Western Australia.
