The State Services Commission is investigating whether a government-owned company may have breached integrity and conduct guidelines.

State Services Commissioner Peter Hughes said the inquiry would focus on Southern Response, a government-owned company responsible for settling claims by AMI insurance policyholders for Canterbury earthquake damage, and a security contractor it hired.

Newshub reported that Southern Response had employed private investigators to spy on claimants, gathering a variety of information on them.

Minister for Greater Christchurch Regeneration Megan Woods received information relating to the company and its use of a security contractor.

On February 16 she referred the matter to the State Services Commissioner for consideration.

Hughes said today that the appropriate course of action was an inquiry.

"The material I have seen raises questions around compliance with standards of integrity and conduct for state servants.

"Those questions need to be answered."

The inquiry will be conducted using the Commissioner's powers under the State Sector Act 1988.

Hughes intends to announce who will lead the inquiry and the terms of reference by the end of next week.