Consumers are being advised to look out for their own interests when they sign up for insurance.
A report by the Financial Market Authority showed nine life and health insurance companies spent $34 million over the past three years on "soft commissions" such as gifts, overseas trips, and business support for agents who met sales targets. About half the money was spent on overseas trips.
FMA director of regulation Liam Mason said there was concern that financial advisors may put their own interests ahead clients so they can get overseas trips and gifts for new business.
However, chief executive of Financial Services Council, which represents insurance companies, Richard Klipin told Morning Report the "soft commissions" were a reality of the industry, and consumers needed to look out for themselves.
"There are a raft of questions definitely worth asking like ... 'In the advice you are giving me today are there any benefits you are going to receive?'."
He said changes to disclosure rules in the law and codes of conduct were in the pipeline, but a broader debate was also underway.
"The industry needs to look at what the use of these incentives are currently and into the future, and whether they still have a place," Mr Klipin said.
He said the FMA's report was focused on whether such incentives were needed, and the industry was actively looking at how to disclose and manage potential conflicts, and ensure they did not get in the way of serving customers.
FMA director of regulation Liam Mason said there was concern that the incentives for selling new policies may tempt advisors to look after themselves first, while the law required them to act in their clients' best interests.
"We are concerned that insurers are designing and offering incentives that potentially set advisers up to fail in complying with their obligations," Mr Mason said.
"If incentives were balanced to ensure the ongoing advice was high quality as opposed to putting it all into that upfront sale then we wouldn't have such an issue."
Mr Mason said it was clear that the incentives were directly linked to business for the companies, because when one insurer stopped offering overseas trips their sales dropped by a third.