The Motor Trades Association of Australia (MTAA) has lodged a formal response to the proposed takeover of an insurance business, telling the government watchdog that it does not ensure adequate protection for repair businesses, consumers, and marketplace competition.

The MTAA said in its submission to the Australian Competition and Consumer Commission (ACCC) that the draft undertaking submitted by Insurance Australia Group (IAG) on its proposed acquisition of WA insurance business RAC Insurance (RACI) contained “serious concerns”.

MTAA executive director Bruce Billson said that while the undertaking added governance detail – including an  independent auditor, a compliance officer, and a complaints handling process – it “did not address the  practical mechanisms through which insurer market power affects repair businesses and consumers”.

MTAA executive director Bruce Billson

“This undertaking adds compliance paperwork, but it does not address the issues that matter most to the  thousands of small repair businesses that service WA motorists every day,” said Mr Billson.

“It is silent on repair pricing, silent on payment terms, silent on consumer choice, silent on network access  protections, and silent on the right of repairers to exercise their professional judgement without insurer  interference – all significant areas of concern when there is such insurance market domination.” 

In its submission, MTAA said there was a “fundamental mismatch between the five-year term of the proposed undertaking and the 20-year exclusive distribution agreement that would lock IAG’s position behind the RAC brand in Western Australia”. “A five-year set of behavioural promises against a 20-year commercial arrangement is not a proportionate  remedy,” added Mr Billson.

“For 15 of those 20 years, IAG would operate with none of the transaction-specific constraints the undertaking is supposed to provide.”

The MTAA said that its submission raised serious concerns about the complaints handling process proposed under the undertaking “which would be designed, administered and managed by IAG itself”.

It said that repairers who depend on IAG for a large share of their work face a well-documented risk of commercial retaliation and are unlikely to use a process controlled by the dominant market participant against whom their complaints are directed. 

“A complaints process run by the party you’re complaining about is not independent oversight, it is self regulation by another name,” continued Mr Billson. 

He said that MTAA’s primary position remained that the acquisition should not proceed. “The competitive harm from  removing RACI, Western Australia’s leading insurer and a genuinely independent competitive force, is  structural and permanent,” he added.

“No combination of behavioural commitments can replicate what RACI brings to the WA market as an  independent, member-owned insurer.”

Mr Billson noted the broader pattern of insurance market consolidation, with three major motoring club insurance businesses acquired or substantially acquired by national insurers within approximately one year. 

“If this deal proceeds, RACT in Tasmania would be the only member-owned motoring club in Australia that  still retains its own general insurance business. These are not transactions that can be reversed,” he noted.MTAA’s submission calls for any undertaking to include, at minimum, a duration matching the 20-year  distribution agreement, independent complaints handling, repair pricing and payment protections, consumer choice disclosure, network access safeguards, professional autonomy protections, mandatory MVIRI Code compliance, and annual reporting on repair supply chain outcomes. 

“We reject this undertaking – small repair businesses cannot be protected by paperwork alone,” said Mr Billson.

“Accepting it as drafted would mean handing IAG a dominant market position with one hand and offering repair businesses a complaints form with the other.”