Troubled insurer AMI claims most customers are staying loyal, despite the Government bailout agreement.

But the Herald has heard from a number of policyholders on monthly premium payments looking for alternative coverage and checking out rivals Lumley, Tower, NZI, AA, State and others.

John Balmforth, AMI chief executive, said out of 1.2 million policies, just 1072 were cancelled.

"We have not seen any trend away from customers paying monthly premiums by automatic payment. We have been overwhelmed by the messages of support and encouragement we have been receiving through branches and the contact centres. Our customers are staying with us and for this we are very grateful.

"While we anticipated losing some customers, what has been most notable has been the low number of cancellations," he said.

AA distanced itself from the Christchurch-headquartered AMI and said there was no connection between the businesses.

Michael Naylor, a senior lecturer in the finance department at Massey University who teaches financial advisers and is an insurance expert, said AMI customers might stay loyal.

"If customers decide to leave, AMI could collapse. People are saying when they renew, they will change companies. But customers have a great deal of inertia and research shows people don't shop around. Currently, AMI is the safest company in the country because it has a Government guarantee.

"At this stage, we don't know if it will be close to bankruptcy, owned by the Government or what," Naylor said. Liquidity and solvency were problems which could beset insurers, he said.

"The current problems at AMI are solvency issues. If customers leave, the company shrinks. When the Government guarantee expires, customers might leave," he said.

"No one was expecting a major earthquake in Christchurch.

"The problem for an insurance company is on an annual basis, they want to cut their costs as much as possible, like cutting reinsurance and increasing profit."

AMI was considerably cheaper than many other insurers, he said.

Internationally-owned insurers operating here should reassure their customers that they guarantee the business.

Issuing statements about their financial stability was not going far enough, Naylor said.

New Zealanders were unprepared for disasters and he raised the spectre of volcanic activity in Auckland.

"It's extremely unlikely in one person's lifetime. But a once-in-a-10,000-year event will happen in one person's lifetime. It doesn't mean it won't happen tomorrow," he said.

AMI, mutually-owned by its policyholders, struck a deal with the Government to provide capital if necessary, because it faces a potential funding shortfall from insurance payouts for the September 4 and February 22 Christchurch earthquakes, having the largest exposure of any insurer to the city.