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Insurance Australia Group (ASX: IAG) faces a prolonged regulatory battle over its proposed $1.35 billion acquisition of RAC Insurance after the Australian Competition and Consumer Commission (ACCC) escalated the deal to a Phase 2 in-depth assessment.
The ACCC says it has decided to progress the review after forming a preliminary view that the acquisition could substantially lessen competition in the supply of motor vehicle insurance and home-and-contents insurance in Western Australia.
The move follows the regulator's decision in December 2025 to decline to clear the deal under the informal merger review regime.
IAG subsequently re-notified the acquisition under the formal mandatory regime that commenced on 1 January 2026, triggering a fresh review process.
RAC Insurance (RACI), owned by the Royal Automobile Club of Western Australia, is described by the ACCC as the market leader in both motor vehicle and home-and-contents insurance in WA.
The deal would hand IAG a combined market share of 55 to 65 per cent in WA motor vehicle insurance and 50 to 60 per cent in home-and-contents insurance.
“This acquisition would combine two of the biggest insurers in WA,” says ACCC chair Gina Cass-Gottlieb.
“RACI is WA’s market leader both in motor vehicle insurance and in home and contents insurance. We consider the acquisition could substantially lessen competition in both the supply of motor vehicle insurance and the supply of home and contents insurance in Western Australia”.
When the ACCC declined to clear the deal under the informal regime in December 2025, Cass-Gottlieb warned the acquisition could allow IAG to raise premiums and reduce product quality for WA consumers by removing a significant competitive constraint.
In a statement today, the ACCC says it is also considering the impact of the acquisition in relation to smash repair services.
The Phase 2 assessment is expected to take up to 90 business days, subject to any extensions.
"IAG remains confident in its position and will continue to work constructively with the ACCC throughout this process," says the insurance giant in a statement to the ASX today.
The ACCC says it has not yet reached a conclusion on the issues and will continue to consider the acquisition in Phase 2.
The ACCC has invited submissions from interested parties by 4 May 2026 as part of the Phase 2 review, which involves a detailed examination of competitive dynamics, barriers to entry, and the likely impact on consumers in the WA market.
The concerns raised by the ACCC are similar to those when IAG was looking to acquire RACQ Insurance in Queensland for $855 million in November 2024.
That deal was eventually approved by the ACCC in May last year after the regulator concluded that there was sufficient competition in the state.
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