The head of Western Australia’s biggest insurer says having a Sydney-based owner is the “best path forward” for its customers, despite some threatening to leave if the acquisition goes ahead.
The Royal Automobile Club of WA (RAC) is looking to sell its insurance operations to Insurance Australia Group Ltd (IAG) in a $1.35 billion deal, which the national consumer watchdog is reviewing.
RAC’s insurance products and services are the backbone of its business, which generated $290 million in net income last financial year.
The company recorded a net profit of $255 million — more than double last year’s earnings.
‘Best path forward’
RAC Group CEO Rob Slocombe said IAG had agreed to maintain a WA workforce, at least initially.
RACWA sells insurance operations to IAG
“Over time that may change as more technology comes in and various things change, but IAG has committed to keeping a significant claims handling presence here in Western Australia,” he told ABC Radio Perth.
Mr Slocombe said he believed the deal was in the best interests of WA customers, but said he was unable to provide details about how.
“We’re very confident this partnership is the best path forward … we’ll continue to cooperate with the ACCC but there’s a limited amount I can say while they’re still deliberating,” he said.
Customers threaten to walk
But some customers and long-time members say they are considering taking their business elsewhere if IAG takes over RAC’s insurance business.
“Last year my premium went up about $30-$40 to my surprise … never had an accident, never made a claim,” customer Cameron told ABC Radio Perth.
Customers say they are concerned about the planned sale of RAC WA’s insurance arm to Sydney-based IAG. (ABC News: West Matteeussen)
“It was good to be able to go in and talk to someone, they were really helpful … maybe I will be looking at other insurance options [if the deal goes ahead].”
Another member, George, said he was not convinced by Mr Slocombe’s pitch.
“How gullible do you have to be to believe that bloke? He’s only saying what he has to say,” he told ABC Radio Perth.
“As soon as RAC change, I’m going elsewhere.”
Mr Slocombe said RAC would be considering “new business areas and opportunities”, pointing to the company’s existing caravan parks, resorts and road safety education programs.
Competition concerns
The Australian Competition and Consumer Commission (ACCC) has flagged serious concerns the deal would likely substantially reduce competition in WA’s insurance market.
The ACCC said a merger would make it unlikely for any new insurance provider to be able to compete against IAG, and also raised potential concerns about IAG’s ability to shut off access to cost-effective repairers for other insurance providers.
RAC Group CEO Rob Slocombe says the group will seek new business opportunities outside insurance. (Supplied: RAC)
The potential reduction in competition would lead to higher premiums for insurance, and less choice for customers, according to the Motor Trades Association of Australia.
The acquisition proposal comes after IAG acquired 90 per cent of the Royal Automobile Club of Queensland’s insurance business earlier this year.
IAG chief executive Nick Hawkins has previously said the company was committed to serving and protecting West Australians.
“We continue to believe the alliance with RAC builds on our shared heritage as mutuals, and strong sense of customer and community,” he said.
The ACCC is set to announce its verdict on the proposal on November 27.
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