The Commerce Commission did not grant approval to Vero Insurance New Zealand's proposal to acquire up to 100% of Tower.
The merger proposed bringing together the second and third largest insurers for domestic house, contents and private motor vehicle insurance in New Zealand leaving only two substantial competitors in the market post-merger.
Chairman Dr Mark Berry said that the Commission was not satisfied that the merger would not have the effect of substantially lessening competition in the personal insurance market.
“The merger would remove Tower as the only independent competitor to Vero and IAG with the scale, brand strength and experience to compete effectively across the breadth of personal insurance markets. While there are other smaller competitors in personal insurance, we do not consider that they replicate the level of constraint that Tower imposes. Without the competition that Tower provides, there is a real risk that consumers would end up paying higher prices for insurance cover while receiving lower quality, such as reduced insurance coverage,” Dr Berry said.
“Relevant to this competitive landscape, Tower is making concerted efforts to reposition itself in the market and improve its performance. There is also a real chance that Tower would be purchased by a third party further enhancing Tower’s significance as an independent competitor in the market.”