Crash repairers have called on the competition watchdog to reject IAG’s acquisition of RACQ Insurance and the Allianz Australia purchase of RAA’s underwriting business.

“These acquisitions offer no benefit to our industry, no benefit to consumers, and only serve to reinforce the dominance of insurers that dictate market terms to the detriment of repairers and motorists alike,” the Motor Trades Association of Australia and its repairs committee says.

“The lack of competition in the insurance sector is already a significant issue, and these acquisitions will only make matters worse.”

The Australian Competition and Consumer Commission called for submissions on both deals by February 14 and says it will make final decisions or release statements of issues on April 24.

The Motor Trades Association says the acquisition targets are significant in their markets and, as part of historical motoring organisations, have high trust levels.

Consumers seeking convenience will take guidance from insurers on potential contractors and will be steered towards the preferences of companies whose principal incentive is profit maximisation, it warns.

“Over the past 15 years, insurers have strategically pursued slow and deliberate mergers, creating the illusion of a competitive market while systematically reducing competition and consolidating power,” the submission says, noting the approach also applies to conditions and exclusions.

The consolidation of scale – particularly when combined with the acquisition of such trusted brands – would give Allianz and IAG significant market power in SA and Queensland respectively, with impacts felt most by small and localised repairers, it argues.

The association says under “the essence of steering”, insurers will tell claimants they can have a fast, one-stop repair if they accept the insurer’s nominated provider; if not, they will need to get three quotes themselves.  

The submission flags pressures that can affect repair quality and notes a growing number of policyholders are told they can choose their own repairer, only to find the insurer will cap its contribution to match repair costs from a preferred supplier.

“What we are seeing is the emergence in [the] general insurance market of something akin to managed care in US health insurance: the insurer does not simply pay for what is needed and actuarially manage that risk; they actively intervene in the selection of remedies.”

The association also says state-based regulations lack consistency and has called on the ACCC and federal government to enforce a mandatory national code of conduct for the motor insurance and repair industry.

It urges the ACCC to expand its insurance sector oversight to monitor market power, improve transparency and prevent anti-competitive behaviour.

From the latest Insurance News magazine: Why motoring clubs are pumping the brakes on their insurance operations