Insurance Australia Group's (IAG) $1.35 billion offer for RAC Insurance (RACI) is weighted heavily toward distribution rather than underwriting, according to the Australian Competition and Consumer Commission's Notice of Competition Concerns. Total consideration comprises $400 million for the acquisition and $950 million for the distribution agreement.
Upon completion, Royal Automobile Club of Western Australia (RACWA) Holdings and RACI would enter an exclusive 20-year distribution alliance and brand licensing agreement, under which RACWA Holdings would continue distributing general insurance products to RAC members in WA under the RAC brand.
RAC has approximately 1.3 million members.
The transaction would be IAG's latest move into motoring club insurance. In Victoria, IAG underwrites RACV-branded home, contents and motor insurance through a joint venture, with RACV managing distribution and member engagement. In the Northern Territory, the Automobile Association of Northern Territory distributes CGU-branded insurance, CGU having been acquired by IAG in 2003.
In May 2025, the ACCC decided not to oppose IAG's acquisition of a 90% interest in RACQ's insurance business in Queensland. That deal included a 25-year exclusive distribution agreement for RACQ to sell IAG-underwritten insurance under the RACQ brand, and completed on 1 September 2025. ACCC In South Australia, Allianz acquired RAA's general insurance business in July 2025 under a comparable structure, with a 20-year exclusive distribution agreement.
The ACCC's preliminary view is that the distribution agreement is unlikely to provide a meaningful constraint on IAG's conduct in relation to the supply and pricing of RAC-branded insurance products post-acquisition.
The regulator said its most relevant frame of reference is competition between underwriters, because decisions about coverage and claims are generally made by the underwriter supporting the brand.
It said RACI's competitive strength rests partly on its member-owned structure, which is not solely focused on profit maximisation, and that it is continuing to consider how a shift toward a more shareholder-focused company would affect the price and service quality of RAC-branded products.
The ACCC's preliminary assessment is that the acquisition would substantially lessen competition in WA motor insurance, giving IAG a 50% to 60% share, and in home and contents insurance, at 45% to 55%.
IAG lodged a remedy offer this month, including a competitiveness framework on pricing and a commitment not to own or control repair service facilities in WA, with carveouts permitted.
An IAG spokesperson said: "IAG's position remains that the proposed acquisition of RAC's insurance business would not have the effect, or be likely to have the effect, of substantially lessening competition in any market."
The ACCC has issued a follow-up questionnaire seeking feedback by July 22. It must issue a determination by 26 August 2026.
