Tower Insurance is lifting the onus from customers to disclose all information that might be relevant to their claim.
Insurance companies in New Zealand usually ask a standard 'catch-all' question about whether a customer has disclosed all information relevant to their policy, even if the company did not ask about a certain issue, or the customer did not know about an issue.
The change will apply to Tower's house, contents and car policies.
Tower chief executive Richard Harding said the levels of distrust in the industry were surprising but were true to some extent, and that pointed to the need for change.
He said it will replace the duty of disclosure requirement by the end of this year, and will instead require their staff to ask more questions.
"All customers will have to do is answer the questions we ask truthfully.
"We are doing this because we trust our customers to be honest with us, and in turn they can trust that we will pay their claim. It is about giving our customers certainty."
Tower's new policy has been dubbed 'trust both ways'.
The law requires those buying insurance to disclose all of the facts they know which could be material to their claim. If they failed to do so, insurers could cancel their claim.
A 1998 Law Commission report highlighted unclear disclosure rules as a major problem with insurance law. It recommended insurers abolish the requirement and replace it with a set of relevant questions, as Tower has done.
The Ministry of Business, Innovation and Employment (MBIE) is undergoing a review of insurance contract law.
In an issues paper published last year, the ministry said consumers did not always know what information to disclose, and the consequences of non-disclosure could be disproportionate.