The Competition and Markets Authority will probe Aviva’s £3.6bn takeover of Direct Line to study if it weakens competition in the insurance market.
The investigation will also be one of the first tests of the regulator, which has pledged to speed up its enquiries following government pressure.
Its probe into the insurance firms will assess whether the move will lead to a “substantial lessening of competition” across the areas the firms operate in.
The regulator has 40 days in its phase 1 investigation to evaluate the deal’s possible impact on competition in the sector.
It has set a 10 July deadline, at which point the regulator will either give the merger the green light, or proceed to a more in-depth phase 2 investigation.
Aviva, the UK’s largest insurer, agreed its takeover of Direct Line in December, with the smaller firm running a range of brands such as Churchill and Green Flag, it also offers home, travel, pet and life insurance.
Aviva sells a range of insurance, wealth, retirement and equity release products and has more than 20 million customers.
Aviva is led by chief executive Amanda Blanc (pictured). Adam Winslow, who became the chief executive of Direct Line just over a year ago, joined from Aviva where he was head of its UK and Ireland general insurance division.
In February, business secretary Jonathan Reynolds said that watchdogs needed a “regulation reset” and authorities should move away from “theoretical issues” that showed “little understanding of how businesses and markets actually operate”.
He said that the Business department had published “a consultation on a new strategic steer for the Competition and Markets Authority to accelerate this work”.
Competition and Markets Authority chief executive Sarah Cardell welcomed the move and added: “We are already working at pace to bring about a step change in the operation of the mergers regime over the coming months.”
The body said its probes would be characterised by “pace, predictability, proportionality and process” and has published a Mergers Charter, which sets out its new way of working.
The move came after former Amazon UK head Doug Gurr was appointed as interim chair of the competitions body in January, unexpectedly replacing Marcus Bokkerink, as the government pushes ahead with its drive to cut red tape.
The financial services group said its retirement sales lifted 33% to £9.4bn last year, from 12 months ago, driven by its highest year of bulk purchase annuity sales which came in at £7.8bn.
But equity release new premiums slumped 38% to £265m, “due to lower levels of market activity and maintaining pricing discipline to ensure a sufficient investment return to support our annuity businesses”.
