The New Zealand Commerce Commission has declined Vero’s application to acquire 100% of the shares in Tower Limited.

The commission says the merger would bring together the second and third largest insurers for domestic house, contents and private motor insurance in New Zealand, leaving only two substantial competitors. 

Chairman Mark Berry says the merger could “substantially lessen” competition in the personal insurance market.

“The merger would remove Tower as the only independent competitor to Vero and IAG with the scale, brand strength and experience to compete effectively across the breadth of personal insurance markets,” he said.

“While there are other smaller competitors in personal insurance, we do not consider that they replicate the level of constraint that Tower imposes.

“Without the competition that Tower provides, there is a real risk that consumers would end up paying higher prices for insurance cover while receiving lower quality, such as reduced insurance coverage.”

Suncorp says it is disappointed with the decision, and Tower says it will work with Vero to assess the implications.

More details in our regular bulletin on Monday.