Partners Life managing director Naomi Ballantyne took issue with the FMA’s latest report into replacement business.

The FMA said it was concerned that advisers were chasing high upfront commissions and incentives, to the detriment of clients. Many advisers were not aware that could create a conflict of interest.

But Ballantyne said it was not the incentives themselves that were the issue – rather “individual morals” driving “poor behaviours”.

But FMA chief executive Rob Everett rejected that outright and said there were clear signs it was commission models that were the problem.

“Insurance providers cannot shirk responsibility for the behaviour of advisers that is a direct result of the incentives designed by those same providers. We point to the data and findings in our report as clear evidence that incentives are influencing advisers’ conduct,” he said.

“We have been raising these issues since 2015 and we’re disappointed to see signs that the industry continues to disregard the interests of the NZ public and consumers.”

He said the industry needed to take more responsibility for aligning its incentives with consumer outcomes and managing the conduct and practices that resulted from that.

“The link between incentives and replacement activity is clear. Among the advisers we looked at there was no evidence that they were taking their obligation seriously.”

He said, while the 24 advisers reviewed as part of this stage of its inquiry into churn, the FMA was able to take no comfort from the findings in the report.

Insurers were encouraged to rethink their “unusually high” upfront commission structures.

Other insurance companies said they were already making changes.

A spokeswoman for Asteron Life said it was committed to sustainable and affordable life insurance for customers.

"We encourage advisers to move to hybrid models with lower u front commissions and higher renewals. We believe that these lead to better support and service and improved customer outcomes, and over the past few years close to 50% of our business has been written on these types of commissions."

Fidelity Life chief executive Nadine Tereora said her firm had already reviewed its "adviser recognition programmes".

"Qualification for our main recognition initiative includes quality (retention) criteria, not just sales. Fidelity Life expects the independent financial advisers who advise on our life insurance products to always put their customers’ interests first – this includes disclosing remuneration and incentives in accordance with legislation.

“We are taking this FMA report extremely seriously. However, in our experience the vast majority of advisers do place their customers’ interests first."

Trevor Slater, client director for the Financial Disputes Resolution Service said the report would have had a better response from advisers if it had a more balanced view and mentioned the positive findings from the FMA investigation.

The Financial Services Council has been approached for comment.