Australia is weeks away from a regulatory decision that could leave just one independent motoring club-owned insurer operating in the country. With the Australian Competition and Consumer Commission’s (ACCC) determination deadline set for Aug. 26, 2026, the Motor Trades Association of Australia (MTAA) has lodged a submission urging the regulator to reject IAG’s proposed behavioural undertaking for its $1.35 billion acquisition of RAC Insurance (RACI) in Western Australia. The case centres on structural competition concerns the ACCC has consistently identified through successive assessments of the transaction since 2025.
The IAG-RAC Insurance transaction is the third consolidation involving an independent motoring club insurance business by a major national insurer in little more than a year. In May 2025, the ACCC did not oppose IAG’s acquisition of a 90% interest in RACQ Insurance under a 25-year exclusive distribution agreement, finding RACQ Insurance was not a particularly vigorous competitor. In July 2025, Allianz completed its $642 million acquisition of Royal Automobile Association of South Australia’s (RAA) general insurance business under a 20-year exclusive distribution agreement after the ACCC concluded other established insurers would continue to provide sufficient competitive constraint.
The RAC Insurance transaction differs materially from both precedents. According to the ACCC’s Statement of Issues, RAC Insurance is the largest supplier of both motor vehicle and home and contents insurance in Western Australia by a significant margin, having increased its motor insurance market share from approximately 35% in 2019 to around 50% in 2024. The ACCC also reported that RAC Insurance wrote approximately $1.3 billion in gross written premiums across all lines in the financial year ended June 30, 2024. IAG has said the RAC Insurance portfolio is expected to contribute approximately $1.5 billion in annual gross written premium, compared with the group’s FY2025 GWP of $17.1 billion.
RAC stated it is aligned with IAG’s decision to re-notify the transaction under the new mandatory merger regime, with the two parties continuing to operate as separate businesses while the process continues. If the acquisition proceeds, RACT Insurance in Tasmania would be the only remaining independent motoring club-owned insurer in Australia.
The ACCC first opposed the acquisition in December 2025, concluding it would likely result in a substantial lessening of competition in the supply of motor vehicle insurance and home and contents insurance in Western Australia. IAG re-notified under Australia’s mandatory merger regime, operative from January 1, 2026, which requires ACCC clearance before completion. The ACCC escalated the matter to a Phase 2 in-depth assessment.
The ACCC also quantified its concentration concerns. Its Statement of Issues estimates the post-acquisition Herfindahl-Hirschman Index (HHI) for WA motor vehicle insurance at approximately 4,400 – more than double the regulator’s 2,000-point threshold for a highly concentrated market – with the increase in HHI described as “very substantial.” The ACCC also estimates that, following the acquisition, IAG, Suncorp, and Allianz would together account for approximately 70% to 80% of both the WA motor vehicle and home and contents insurance markets.
The ACCC also identified separate competition concerns in the smash repair sector. Its preliminary view is that, following the acquisition, IAG would likely become the largest acquirer of smash repair services in Western Australia by a considerable margin. The regulator said market participants had raised concerns that IAG could use that position to negotiate exclusive, reserved or priority access to repair capacity. According to the ACCC, this could enable IAG to secure exclusive access to repairers, prioritise repairs for its own customers, or require repairers to maintain spare capacity, potentially limiting rival insurers’ access to quality and timely smash repair services or increasing their costs. The ACCC said these risks may be particularly acute in capacity-constrained regional centres including Geraldton, Busselton, Bunbury, Karratha, Broome, and Exmouth.
On July 1, 2026, IAG offered a court-enforceable undertaking covering insurance product benchmarking, smash repair exclusivity, and a prohibition on owning repair facilities in WA, to run for five years. IAG described the commitments as designed to reinforce ongoing competition and choice in the WA smash repair market, while maintaining its position that the acquisition would not substantially lessen competition in any market.
The MTAA – Australia’s peak national automotive industry body representing smash repairers, mechanical repairers, vehicle dealers, and related businesses – argues the mismatch between a five-year undertaking and a 20-year brand licensing lock-in is the central flaw. MTAA executive director Bruce Billson said: “Five years of behavioural promises against a 20-year lock-in is not a remedy; it is a fig leaf. The undertaking offered by IAG is window-dressing for what is nothing more than a waiting game.”
The MTAA’s objection aligns with the ACCC’s own documented approach. The ACCC’s position under both the old and new merger regimes is that behavioural undertakings will rarely be sufficient to address competition concerns and may be accepted only if structural remedies are not suitable. In practice, the ACCC accepted only one partly behavioural undertaking across all merger assessments in 2024, reflecting a consistent preference for divestiture remedies where mergers raise concerns.
The MTAA further argues the undertaking is silent on issues it considers commercially material to repair businesses – pricing, payment terms, parts selection, professional autonomy, and consumer steering – and that the proposed complaints mechanism would be administered by IAG itself. “For the first quarter of the agreement, IAG would be on its best behaviour, while motorists thought their motoring organisation was still providing competitive insurance when the brand is actually being exploited to badge-engineer IAG policies, practices and pricing. For the remaining three-quarters, WA repairers and motorists would be on their own,” Billson said.
If the ACCC approves the deal with conditions, the MTAA has outlined minimum requirements: independent oversight of the undertaking, an internal IAG code custodian, enforceable 30-day payment terms, a repair cost variance register, and formal protections for repairers’ professional judgment on repair methods and parts. Its preferred outcome, however, is outright rejection. The association has also renewed its call for a mandatory national Motor Vehicle Insurance and Repair Industry Code of Conduct, enforceable by the ACCC with financial penalties – framing it as a response to structural market shifts rather than any single transaction. “A five-year undertaking on a single transaction does not fix a systemic problem. What repairers and motorists need is a nationally consistent, enforceable code that sets fair rules for every insurer, in every state, for the long term,” Billson said.
