The Australian Competition and Consumer Commission (ACCC) has dragged Insurance Australia Group's (IAG's) long-running bid to absorb RAC Insurance (RACI) into a deeper regulatory investigation. The regulator has announced it will subject the proposed acquisition to an in-depth Phase 2 review, an investigation that could take up to 90 business days.
"This acquisition would combine two of the biggest insurers in WA," said ACCC Chair Gina Cass-Gottlieb (pictured). The central thrust of the ACCC’s case is that this is not a merger between a big player and a minnow — it is a combination of the two most powerful insurers in the state.
In the regulator’s statement, Cass-Gottlieb pointed to IAG's NRMA-branded presence and RACI's position as "WA's market leader both in motor vehicle insurance and in home and contents insurance."
That concentration sits at the heart of the ACCC's concern. IAG and RACI both supply motor insurance and home and contents insurance in Western Australia, and the deal would see IAG underwriting those products under the RAC brand — effectively bringing the state's number one and a major competitor under a single underwriting roof. The ACCC has also flagged concerns about knock-on effects in smash repair services, a downstream market where insurer leverage can meaningfully shape broker and customer outcomes.
The decision, handed down under the ACCC's new formal merger regime, means the ASX-listed insurance heavyweight now faces forensic, evidence-heavy scrutiny.
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Under the mandatory merger control framework, the ACCC can only push a transaction into Phase 2 if it is satisfied the deal could have the effect, or be likely to have the effect, of substantially lessening competition in a market. It is, in effect, the regulator's red flag — and it comes with teeth. Phase 2 filing fees range from roughly $475,000 to $1.6 million depending on deal value, a regulator-imposed cost that signals just how seriously the ACCC treats the escalation.
Between January 1 and March 31, the ACCC received 50 merger notifications and approved 39 deals at Phase 1, with only two pushed into Phase 2: Ampol's acquisition of EG and Coles' acquisition of a supermarket and liquor site in Kalgoorlie. IAG-RACI now joins that list as the third — and the first financial services transaction, let alone the first insurance deal, to face in-depth treatment.
The regime itself is a structural change in how M&A is policed in Australia, replacing the old voluntary informal clearance process with a mandatory, suspensory system in which deals cannot complete without ACCC approval. Phase 2 reviews can run up to 90 business days and involve far more granular economic analysis, third-party submissions and internal document production. Dealmakers have already flagged the prospect of Phase 2 as a key deal-certainty risk, with some vendors factoring it into how they evaluate bidders. In plain English: the regulator is not convinced, and wants the data to prove it either way.
This is also the second time IAG has tried to get this deal across the line. The insurer originally applied under the previous informal merger regime in 2025, but in December that year the ACCC declined to clear it on the information available. IAG re-notified under the new formal regime — and has now been escalated again.
For brokers placing personal lines risk into the WA market, the implications are material: fewer independent underwriters competing for the same risks typically means tighter pricing discipline for insurers and less negotiating leverage for intermediaries. The ACCC invites submissions in response to its Phase 2 Notice by 4 May 2026.
In a statement to the market on Friday, IAG acknowledged the escalation but framed it as a procedural step rather than a substantive setback, noting the move "is in line with the ACCC's new merger control review process, where the ACCC may commence a more detailed Phase 2 assessment if its initial Phase 1 review identifies potential concerns."
The insurer was careful to emphasise that the ACCC "has not reached a conclusion" on the proposed alliance with RAC — a deliberate echo of the regulator's own language — and said it "remains confident in its position and will continue to work constructively with the ACCC throughout this process."
