Insurers are opposing extending a policy change to businesses, which would lift the burden on them to disclose information relevant to claims.
Tower Insurance announced yesterday it would stop asking customers a catch-all disclosure question, and instead ask a series of smaller questions they will have to answer truthfully.
It said that would address concerns about customers unwittingly leaving something out when they're asked if there's anything else it should know.
The move is in line with a suggestion floated in the Ministry of Business, Innovation and Employment (MBIE) review of insurance contract law.
However, Insurance Council of New Zealand chief executive Tim Grafton said this move by Tower could mean they wanted to be more customer-centric and stand out.
He said the sector was open to discussing with the government how it could do things better.
But he told Morning Report he also believed insurers had been treated unfairly through the spreading of misinformation by the likes of Consumer New Zealand.
In the general insurance sector, "we write about eight million home, contents and motor claims a year, of those claims about 3200 end up being questioned whether or not it should be declined. Of those only 10 percent are declined. The problem is minuscule," he said.
Still, there was a lack of trust because there was a lot of stereotyping and myth about insurance, he said.
"What Consumer NZ does not understand is that there's two things about insurance - the transactional relationship between the insurer and the insured, and there's also the duty of obligation that each insured has to every other insured in that pool of money.
"If you cannot represent that risk - we're talking about disclosure - you're not only doing the insurer but you're doing all the other insureds in the eye as well. Very very few people fall into that category."
He told RNZ, the risks with businesses were very complicated, "you would really want to be wanting to have a lot more disclosure on the part of those sorts of businesses and not reliant on solely trying to answer a bunch of questions to capture that level of complexity".
The council's submission to MBIE, obtained by RNZ, said disclosure rules should remain the same for businesses.
It also poured cold water on an idea to make insurers tell all customers what information they will collect about them from third parties.
"[That] would be impractical for general insurance due to the ... varying nature and diversity of, and ongoing change in, potential data sources used for underwriting different kinds of policies and verifying information."
The council's members include Tower, IAG, Suncorp, and Zurich.
An insurance industry watchdog hopes the move by Tower to change its disclosure rules will result in fewer complaints.
Insurance and Financial Services Ombudsman Karen Stevens said her office dealt with many non-disclosure cases.
"People can innocently fail to disclose material information and find that they have no cover which is a huge thing to happen to somebody if they have a house and they need house cover and motor vehicles ... they might find that they are uninsurable going forward."