The competition watchdog has no plans to stand in the way of German financial services firm Allianz’s plans to acquire the Royal Automobile Association of South Australia’s personal insurance business (RAAI).
Based on the Australian Competition and Consumer Commission’s (ACCC) findings, Allianz’s purchase of RAAI’s general insurance business from the Royal Automobile Association of South Australia for $642 million is unlikely to substantially lessen competition.
The approval includes a 20-year exclusive distribution arrangement between Allianz and RAAI.
The ACCC expects other suppliers in South Australia to compete with a merged Allianz and RAAI.
“… we found that competition in relation to price and coverage in South Australia is being driven predominantly by other insurers, including Suncorp through its AAMI brand, IAG, Auto & General and Youi,” ACCC Commissioner Philip Williams said.
However, the ACCC recognised that increased claims volatility linked to severe weather and elevated reinsurance costs have affected RAAI’s operating outlook, potentially limiting its future competitiveness.
Meanwhile, The Motor Trades Association of Australia (MTAA) is worried about the accelerating consolidation in the insurance industry.
Allianz’s acquisition of RAAI follows the recent green light the ACCC gave to Insurance Group of Australia's (ASX: IAG) acquisition of RACQ Insurance in Qld, marking two major motoring club-related deals within weeks.
Based on recent approvals, the ACCC is expected to proceed with approvals for IAG’s proposed acquisition of RAC Insurance from RAC WA.
Interim executive director of MTAA Rod Camm claims that the developments raise structural concerns for the broader insurance market.
“Australia is seeing a fast-moving consolidation of its insurance sector, with serious consequences for choice, pricing, and accountability,” he said.
“Less competition means fewer options for consumers and increasing pressure on local repairers.”
These concerns coincide with the MTAA’s support for reform of the Motor Vehicle Insurance and Repair Industry (MVIRI) Code of Conduct.
The group wants stronger regulatory oversight and clearer enforcement tools to address power imbalances between insurers and repairers.
While the ACCC did consider the impact on independent repairers, the regulator concluded that it wouldn’t substantially lessen competition as Allianz is unlikely to have the ability to reduce prices and supply terms.
Meanwhile, Motor Trade Association SA/NT CEO Darrell Jacobs has expressed “deep disappointment” at the ACCC’s decision, which he expects will put “crippling pressure” on independent and family-run repairers.
With South Australian motor-club insurance on the verge of being lost, Jacobs described the ACCC’s decision as a dark day for South Australian motorists and small businesses.
“Allianz is using South Australian trust in the RAA brand, while pulling the wool over their eyes. With this decision, South Australian motorists will get stung,” he said.
“RAA Insurance is now as local as Lederhosen."
