The Australian Competition and Consumer Commission will not oppose the proposed acquisition of Aviva plc's CGU Insurance by Insurance Australia Group, ACCC Chairman, Professor Allan Fels, said today.
IAG and CGU are the largest and fifth largest general insurers in Australia respectively. The ACCC has conducted extensive market inquiries into this proposed acquisition, consulting with competitors and other interested parties.
Post-acquisition, IAG will have around a quarter of the national market for general insurance, and the biggest four insurers between them will have around two-thirds of the national market for general insurance.
On most product lines there is little overlap between IAG, which has been more consumer focussed, and CGU which is commercially focussed.
The only insurance lines in which the ACCC's concentration thresholds are crossed are:
- home insurance in which IAG (26%) and CGU (12%) are the largest and fourth-largest players respectively
- domestic motor insurance where IAG (36%) and CGU (6%) are the largest and fifth-largest players respectively.
The ACCC found that home insurance and domestic motor insurance are the only two significant areas of overlap between IAG and CGU.
Considered on a state basis, the domestic motor insurance markets in NSW and Victoria show the highest levels of market concentration. In NSW where IAG currently has a 56% market share and CGU 2%, IAG's post-acquisition market share will be 58%. In Victoria where IAG has a 42% market share and CGU a 9% market share, IAG’s post-acquisition market share will be 51%.
However, the ACCC notes the evidence that the market for domestic motor insurance is in transition to becoming national because of changing distribution channels and the emergence of national insurers.
The ACCC found a substantial lessening of competition from the acquisition was unlikely because IAG will continue to face vigorous competition from other significant players including Suncorp, Royal & Sun Alliance, QBE and Allianz. There is also evidence of some new entry into the general insurance market.