The Australian Competition and Consumer Commission (ACCC) will not oppose IAG’s acquisition of Wesfarmers’ underwriting business.

The decision was made public a few minutes ago.

The ACCC says in a statement that it considered submissions from a number of sectors in reaching its decision, and focused on the likely impact in specific markets where both companies underwrite products, including home and contents, domestic motor, rural insurance and commercial insurance products such as heavy vehicle insurance.

It also examined how the proposed acquisition may affect competition for the acquisition of key inputs by insurers, particularly smash repair and windscreen repair/replacement services. 

“Given the relative sizes of IAG and Wesfarmers in the rural insurance market, the ACCC’s inquiries particularly focused on the likely competitive impact of the proposed acquisition in this market.” 

It notes that rural insurance products include packaged farm insurance and crop insurance that is offered by a number of companies – and could be offered by others in the future – and found that “while the proposed acquisition would reduce the number of key underwriters from six to five for packaged farm insurance and crop insurance in Australia, the level of existing and potential competition in this market would be expected to constrain the merged firm”. 

ACCC Chairman Rod Sims says no farmer or grower representative associations expressed concerns to the ACCC in market inquiries.

For the home insurance and domestic motor insurance markets, the ACCC considered whether the proposed acquisition would remove a vigorous and effective competitor. Wesfarmers’ underwriting of these personal insurance products sold via Coles is currently small but growing. 

The regulator determined that other competitors including the banks and “challenger” brands such as Woolworths are likely to have a similar ability to provide strong price-based competition for home and motor insurance.

It also examined the agreement for IAG to underwrite Coles’ insurance products under a 10-year distribution agreement and decided that while the proposed acquisition removes an independent underwriter from the market, “at the retail level the proposed acquisition is unlikely to materially change competitive dynamics”.

“The ACCC concluded that the proposed acquisition is unlikely to substantially lessen competition in any insurance market or in relation to IAG’s acquisition of smash repairs or windscreen replacement services,” Mr Sims said. 

“Therefore, the ACCC has decided not to oppose the proposed acquisition.”

The New Zealand competition regulator will announce its decision on whether to allow the sale to IAG of Lumley Insurance on April 30. Lumley is the country’s third-largest insurer. Brokers and competing insurers have opposed the sale, arguing it will severely impact competition in the New Zealand market, where IAG is dominant.