The authority has written to 12 insurance firms ordering data on all new policies written in the past five years including policyholder details, adviser details, commission payments made to advisers.

It has also included a detailed questionnaire asking questions including ones around what premium levels would be if churn was reduced and also questions around claims experiences on replacement business.

Partners Life managing director Naomi Ballantyne welcomed the enquiry saying it would “sort the wheat from the chaff.”

She says there have been a lot companies accusing others of churning business and this enquiry would get the facts on the table.

While there are reports churn is making up around 80% of business written at the moment, there is no data to confirm this.  Ballantyne says she has always believed replacement business makes up 40% of the business written.

When Partners started around 60% of its business was replacement and that fell to around 40%, she says. However there was a spike when Fidelity bought the Tower business.

Ballantyne says when business is replaced often new business is written for the client at the time.

She said it was very difficult to quantify what would happen to premiums if replacement business reduced, and she was pleased the FMA was asking about claims experiences.

AIA chief executive Wayne Besant said the enquiry will give a good sense of what the market is doing. "It's good to have a really close assessment of the market."

"At this stage it's just a request for information."

He says the FMA is focussed on what is best for consumers and if this helps more New Zealanders get life cover that's a good thing.

As for the issue of churn he says: "I haven't get a view on churn."

The industry tried to engage with officials two years ago on the issue and investigated opening a formal discussion with the Commerce Commission. However it chose not to proceed down these lines as it was going to cost at least $500,000 to have the discussion with officials and there was no guarantee they would get an outcome.

"Attempts to address this issue by discussion have been thwarted by the Commerce Act which requires an authorisation before any conversation or negotiation on these issues can occur," Financial Services Council chief executive Peter Neilson says. "Our advice was that such an authorisation would be likely to cost $500,000 and would be incurred without any guarantee of a useful outcome."

"The FSC insurance members therefore decided to use the Financial Advisers Act review to address any issues with them," Neilson said.

One high-placed industry source has suggested the exercise is not a good use of time and money as the FMA really needs to talk to policyholders and advisers about why business was moved.

“It’s a very expensive way to get to the nub of the issue,” he said.

“It’s a legitimate area to make enquiries,” he said. “I’m not sure it will help.”

The enquiry is being made under Section 25 of the FMA Act which gives it wide powers to gather information. Companies have to supply the information by mid-July.

No-one was available from the FMA for an interview on its enquiry.