Insurance Australia Group (ASX:IAG) will make a public benefits application for its proposed alliance with the Royal Automobile Club of Western Australia (RAC) after failing to secure Australian Competition and Consumer Commission (ACCC) approval for its acquisition of RAC Insurance, according to a Wednesday filing with the Australian bourse.
In a same-day statement, the ACCC said its phase two assessment of the deal showed it would substantially reduce competition in the motor vehicle insurance and home and contents insurance space in Western Australia.
The deal would leave Insurance Australia Group with overall market shares in Western Australia of about 55% to 65% in motor vehicle insurance and about 50% to 60% in home and contents insurance, the ACCC said.
"If the acquisition were to proceed, we consider the level of constraint from other insurers would be unlikely to be sufficient to address the loss of competition arising from the acquisition," said ACCC Chair Gina Cass-Gottlieb.
Insurance Australia Group will now seek a determination that the proposed alliance be approved because it will result in a net public benefit. The public benefits phase is expected to take about 50 business days.
The company's shares fell past 1% in recent Wednesday trade.