Consumers are paying more than ever for insurance but they're not getting a fair deal, according a consumer watchdog.

Consumer NZ chief executive Sue Chetwin said its latest report involving survey research found significant problems in the insurance market, including a high level of complaints and low levels of trust.

"Just 13 per cent of consumers were confident they could trust insurers to give them good advice," she said.

"Many were unsure about the cover provided by their insurance policy and what they were getting for their money.

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"Only 18 per cent felt they fully understood the terms of their policies."

The survey also found one in four had experienced a problem with their insurer, she said.

The top complaint according to the report was having a claim unreasonably declined.

Chetwin said insurers had wide-ranging rights to decline a claim if they decided a customer had not told them something they considered material, regardless of whether the customer knew they needed to disclose this information.

"In other countries, consumer protection laws prevent insurers from unreasonably refusing a claim in cases of innocent or accidental non-disclosure," she said.

"But that's yet to happen here, which means Kiwis are more likely to have claims declined."

Consumer NZ's research also found those who bought cover through an insurance adviser or broker were more likely to feel they were getting a bad deal.

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They were significantly less likely to be satisfied with the service they got compared with those who bought direct from an insurance company.

Chetwin said this difference was most evident among consumers who'd bought life insurance.

Just 28 per cent of those who got their life insurance from a broker were happy with the service provided, compared with 44 per cent who bought direct from an insurance company.

"Life insurance brokers get paid on commission, which can be as high as 200 per cent of the premium.

"Commission-based selling comes with a huge risk the broker will put their earnings ahead of what's right for their customer.

"The results of our research suggest selling insurance this way is leading to poorer outcomes for consumers."

Insurance Council of NZ CEO Tim Grafton said the industry was not perfect but denied that general insurers were not being fair.

Grafton pointed to contrasting results calculated by MBIE's Consumer Protection department.

In 2018, the MBIE survey found that only 10 per cent of insurance consumers had experienced an issue with their insurer.

Of that 10 per cent, just under half had experienced issues with the terms and conditions of their policy.

In addition, Commerce Commission data for at least the past two years showed that insurance is not in the top seven most complained-about industries.

"These aren't bad figures," Grafton said.

"Especially considering insurance consumers were less likely than average to have had an issue with their purchase.

"However, we accept a lot more needs to be done to better communicate the value of insurance to our customers.

"A lot of work is currently under way right across the sector to put customers' interests first."

This work included updating the Fair Insurance Code, checking that all policy documents were written in plain English, and working with vulnerable consumer groups to help them better understand insurance and financial products, he said.

"The challenge we face with insurance is that it is unique among consumer products.

"It's something you pay for but hope never to have to use, unlike a car or an internet connection.

"It works because the majority of people pay for the misfortunes of the few, and each of those misfortunes comes with highly personalised circumstances.

"That's the conundrum insurers face: most people seldom claim."

But that did not mean insurers were unfair, he said.

"In fact, more than 90 per cent of all claims are paid and the vast majority that are not are claims that have been withdrawn because they're for less than the policy excess or outside the scope of the policy or people not wanting to lose their no claims bonus."

ICNZ members had voluntarily committed to not decline claims unreasonably, he said.

Consumer NZ is campaigning for changes to insurance law to improve protection for consumers.

Proposals to change the law have been released by the Ministry of Business, Innovation and Employment. The deadline for public submissions on the proposals is June 28.

Chetwin encouraged consumers to have their say.

"If you want to get involved, we've put up a template submission on consumer.org.nz to help you."