For example, ISI figures show new business in the largest product category, term life insurance, fell to $23.5 million in the three months ended December compared with $25.3 million in the September quarter and $23.7 million in the December 2010 quarter.

Lapse rates at $23.6 million exceeded new business and was significantly higher than the $20.6 million recorded in the December quarter last year, although it was down from $24.7 million in the September quarter.

ISI chief executive Peter Neilson, who says his members account for about 80% of the life insurance industry, says the drop may reflect a combination of the difficult economy and people choosing not to pay for insurance as well as the more onerous requirements of the new regulatory regime.

"Most of the major companies are in the process of reviewing their distribution arrangements and therefore there would have been people who have moved companies over that time," Neilson says.

So the apparent drop could reflect non-ISI members taking market share. "If anybody (not an ISI member) has grown sales more rapidly than our membership group, it wouldn't show up in our figures," Neilson says.

It is well known within the industry that advisory group Newpark Financial Services is now placing most of the business it used to place with ANZ Bank-owned OnePath with Partners Life, which isn't an ISI member.

Partners Life was started last year by Naomi Ballantyne, who founded what is now the OnePath life insurance business and was instrumental in establishing industry giant Sovereign. Ballantyne wasn't available for comment.

OnePath's share of new business has fallen sharply in recent quarters and its lapse rate is also one of the highest in the industry.

OnePath general manager of wealth distribution, Jeremy Nicoll, says his company isn't surprised at the drop in business after it announced changes to its commission structure which are coming into force from October 1 this year.

The new structure will mean commissions will vary according to the persistency of business written by individual advisers and those with poor persistency levels will receive significantly less commission.

"We did anticipate we would see an impact on our production levels," Nicoll says. "Our overall strategy is to be here for the long term for our customers and also for our advisers. In our view, it's better for a customer to have a long term relationship with an insurance company."

OnePath is more interested in growing its in force business, Nicoll says. Its in force business in risk products rose to $135 million in the December quarter from $133 million in the September quarter and $124.6 million in the December quarter of 2010.