The law requires licensed insurers to have a current rating from an independent ratings agency.

It can cost about $100,000 to get a rating.

But insurance law specialist Crossley Gates said that was of little use to the companies' customers. He said the issue had been highlighted again by the failure of CBL.

"If insurer failure is the problem we are trying to avoid I don't think the ratings thing is working at all. It's just a hugely expensive exercise."

He said the Insurance Prudential Supervision Act should be enough to deal with issues of insurer solvency. The Reserve Bank should be given more resources to monitor the sector, if necessary.

"If prudential regulation is not enough, maybe that needs to be bolstered up there. I would have thought [ratings] are redundant and should be dropped."

David Whyte, former managing director of AIG Life in Australia and general manager of AIA in New Zealand, agreed the ratings were a waste of money.

AIG nearly folded in the global financial crisis, despite having an AA+ rating.

He said some in the industry thought their obligations under IPSA were more stringent than the tests for financial ratings agency research.

"This surely raises the question why there is additional expense incurred in creating a report that adds nothing to the comfort provided by the IPSA legislation."

Consumers did not understand what ratings meant, anyway, he said.

"I know the Reserve Bank made the claim they were useful for information for its purposes but they can pay the fees in that case, it's a significant expense."

He said when AIA was downgraded from AAA to AA+ it made no difference at all to its operation.

The difference in funding costs as a result of the downgrade was in points of a percentage, he said.

"The blanket demand on all insurance licensees [for a rating] is not appropriate."