RAC’s proposed insurance partnership

Tougher regulations, more frequent natural disasters and the rising cost of reinsurance – which is effectively insurance for insurers – are reshaping the way insurers operate; and increasing the risk and cost of providing cover.

These challenges are significant for RAC’s insurance business, which operates solely in Western Australia, meaning the organisation has fewer options than those with a larger and more diverse footprint.

That’s why last year RAC proposed a 20-year general insurance partnership with IAG, Australia’s largest general insurance company, aimed at keeping RAC insurance sustainable, competitive and focused on members for the long haul. As part of the transaction, IAG will acquire and manage 100 per cent of RAC’s insurance underwriting business.

Under the proposal, members with RAC insurance products would continue to deal with local RAC staff and the RAC brand that they know and trust. IAG would take on the insurance risk and underwriting, and claims handling - which, importantly, would retain a significant local presence.

In December, the Australian Competition and Consumer Commission (ACCC) announced it would oppose the arrangement, raising questions about competition in WA’s insurance market.

So what does this mean for RAC, and for members who rely on RAC insurance every day? RAC Group CEO Rob Slocombe explains the thinking behind the proposal, the challenges facing insurance today, and what comes next.

What was the rationale for the proposed arrangement with IAG?

RAC has been in insurance since 1947, when we first introduced our motor insurance product, followed by our home insurance product in 1970, and we have had tremendous support from our Western Australian members over that time.

But in the past 10 to 15 years things have been changing.

The insurance market has become more complex — everything from the technology needed to support insurance systems, through to the regulatory environment in which we operate.

We are seeing the impacts of climate change — an increase in the extreme weather events that lead to higher claims — and we are also facing greater reinsurance costs, where we go to market and take out our own insurance to cover the risks we have.

At RAC, we realise we have to make decisions about how we manage those changes now and for the future, and that’s why the partnership with IAG makes sense.

Can you explain why having IAG as RAC’s insurance underwriter would help?

We have nearly $270 billion worth of risks that we insure, in both home insurance and motor insurance, and the simple reality is we are seeing both the number and value of claims and costs increase.

RAC only insures in WA, and most of our insured members are in Perth. That creates a risk around geographic concentration. A bad storm, a bushfire, or any natural disaster can have a serious impact on a large proportion of our insured members.

In the case of a larger national insurer like IAG, however, a storm affecting customers in Brisbane won’t also affect customers in Melbourne. It allows them to balance their risk more effectively across the nation.

We have spent a lot of time fine tuning our business, but we believe it’s now in our members’ best interests to partner with a larger group.

Will RAC lose its strong Western Australian presence?

We are immensely proud of our track record in working with members when they need us — going door to door, at times, after a disaster to check people have everything they need.

The partnership with IAG would see this local focus continue, so if you call the RAC call centre, you speak with someone in Joondalup or West Perth, or if you drop into a branch, you are still seeing our people. IAG would also continue to maintain a significant claims handling presence here in Western Australia.

We are not getting out of insurance, we are simply changing the way it is delivered.

We would continue to sell insurance under the RAC brand, but whereas we currently design, underwrite and sell the policies ourselves, we would do this in partnership with IAG.

What would it mean for RAC more broadly?

RAC has existed since 1905 and for the first 21 years we were an advocacy organisation only, we did not offer member services. Then in 1926, 100 years ago this year, we started the roadside assistance business we are most famous for.

We started in insurance in 1947 but since then we have diversified to deliver more things that matter to our members.

We were the first licensed travel agency in Western Australia, we have a finance company, a security business, a broader motoring business, and parks and resorts from Broome down to Esperance. We also have an innovation business under the Betterlabs brand, and our St Ives retirement business.

If the partnership with IAG proceeds, we expect to be able to free up capital to allow us to invest in new and expanded products and services for the benefit of our members.

One thing that won’t change is our core purpose – to make life better for all Western Australians. Our road safety focus, our work with local communities, our advocacy for a better WA – it all continues.

The ACCC announced in December that it would oppose the partnership. Where to from here?

The ACCC plays an important part of decision making under merger and acquisition rules in Australia. We respect the ACCC and have worked to try to provide the information they have required about the proposal.

It’s important to note that at the end of 2025, a significant change occurred to the regime under which the ACCC makes merger decisions.

The ACCC’s decision on our proposed partnership was made under the previous rules, which ceased at the end of December. The new regime, which has some additional procedural features that impact the way it considers proposals, allows a new application to be made – and this is the current focus.

We continue to work towards this partnership, which we strongly believe is the best possible pathway forward for our organisation and our members.