The Commerce Commission is investigating Air New Zealand for insurance offered on its website on an opt-out basis.
Travellers booking domestic flights with Air New Zealand are automatically given insurance for a fee of $10 per travel leg to cover for cancellation and unexpected flight disruption.
The airline gives them the option to then remove it from the final bill.
Air New Zealand spokesperson Imogen Dennis said it had been in a "constructive discussion" with the Commerce Commission during the past year over whether an offer pre-selected but able to be de-selected was misleading.
"The debate over opt-in or opt-out is widespread," she said.
"In this instance Air New Zealand considers that travel insurance is a valuable customer benefit regardless of where it is purchased."
Ms Dennis said customers were given at least three clear opportunities to opt-out in the online booking process, with most choosing to do so.
"Very few of those who purchase insurance seek refunds," she said.
"These are given without question in accordance with Air New Zealand's terms of business which provide for full refunds within 14 days of booking provided travel has not commenced and no claim has been made."
A Commerce Commission spokesperson said since it could not comment as the investigation was ongoing.
Wellington lawyer Michael Wigley said too many travellers could be buying domestic travel insurance from Air New Zealand unwittingly, and that was unfair.
He had complained to the airline after noticing he had paid for the insurance on a number of flights without knowing.
"I just think that we as passengers shouldn't be having to do this. It's a fairly small amount of money for us but for Air New Zealand ... if lots of people are doing this, and I suspect that they are inadvertently, that adds quite a lot to the bottom line and that seems to be pretty unfair," he said.