New Zealanders are giving up private health insurance at a rising rate, at the same time as the amount insurers pay out for each remaining member climbs steeply, according to a report released on Friday by the Financial Services Council.
The report, written by consultancy MartinJenkins, found 9 percent of people with health insurance ended their policy in 2025, up from 7 percent in 2022. In raw numbers that is 80,770 people who walked away from major medical cover in a single year.
Over the same period the average claim paid per member rose 75 percent, reaching $1,921 in 2025. The figure was $1,097 in 2021, according to figures reported by RNZ.
Those two numbers pull in opposite directions and explain most of the pressure on the market. Members are claiming more and treatment is costing more, which pushes premiums up, and every premium rise gives another group of households a reason to cancel. The people most likely to hold on are the ones who expect to claim, which pushes the average claim higher again.
“Health insurance is being used more, claims are rising, treatment costs are rising, and households are feeling it,” Financial Services Council chief executive Kirk Hope said in the council’s summary of the report.
Hope said the trend mattered because insurance was already helping fund treatment and get people seen sooner, and affordability risked putting that out of reach of more households.
“Just as New Zealand needs every part of the health system working better together, people are cutting back the very cover that helps them access care sooner,” he told RNZ.
Cancelling is not a decision that can be easily undone. Someone who drops a policy and later wants it back usually has to go through underwriting again, which can mean any condition that developed in the meantime is written out of the new policy. That makes it a one way door for a lot of people, and it bites hardest in the years when premiums climb fastest and health problems become more likely.
About 35 percent of New Zealand adults hold private health insurance. Of those, 43 percent get it through an employer or a group scheme rather than buying it themselves. That split is the part of the story the council is most interested in, because group cover is generally community rated and not individually underwritten, so a person’s medical history does not price them out of it.
The council is using the report to press a policy it has argued for repeatedly, which is removing fringe benefit tax from health and life insurance paid for by employers. Modelling by NZIER, also commissioned by the council, put the total economic benefit at $408.7 million against $210.7 million to $234.5 million in revenue the government would give up, a net gain of about $198 million. NZIER estimated the change could bring roughly 200,000 more people into group health cover, move 10,459 procedures off public waiting lists and save 471,630 days of waiting for the patients involved.
“It’s a very effective way, it’s community-rated and it’s not underwritten so it’s a very effective way for people to get access if the employer is providing low-cost or no-cost health insurance for them, but it’s very expensive for employers because they have to incur a 50 percent to 70 percent tax on premiums,” Hope told RNZ.
Officials have not been persuaded. A Ministry of Health briefing note prepared for a July 2025 meeting between Health Minister Simeon Brown and Southern Cross, reported by Insurance Business, said public subsidies for private health insurance were “generally low value, as many policyholders would pay for private insurance without public subsidies”, and that “those with high health needs are unlikely to afford premiums with a subsidy or be offered coverage”.
Inland Revenue’s position was that an exemption would “materially erode the integrity of the broad personal income tax base and create equity concerns” for people who buy their own cover outside an employer scheme. Neither Treasury nor Inland Revenue supports the change.
That is the whole argument in miniature. The industry sees a tax that discourages employers from covering staff and idle private capacity that could take pressure off public waiting lists. Officials see a tax break that would flow mostly to people who already have cover and who work for employers big enough to run a scheme, funded by everyone else, including the people least likely to ever be offered a policy on reasonable terms.
The report also makes a broader point about how small the private layer is here by international standards. Life insurance in New Zealand is worth about 0.8 percent of GDP, against an OECD average of 3.5 percent. The council’s argument is that this leaves both households and the public system more exposed than they need to be when someone gets sick or dies, because there is less private money in the system to absorb the shock.
New polling released with the report found 55 percent of New Zealanders want the government to prioritise greater use of public and private healthcare working together as demand grows. Separate polling put support for removing fringe benefit tax on employer provided health and life insurance at 68 percent.
“The question isn’t whether public or private healthcare should do everything but how we build a system where Kiwis can get the care they need sooner, bring public waiting lists down, and protect more households for when something goes wrong,” Hope said.
Whether any of it changes is a question for after the election. The council has folded the proposal into its 2026 election manifesto, which means the next government inherits a well argued industry case and a set of official papers arguing the opposite. In the meantime the underlying numbers keep moving in the same direction, with fewer people covered, larger claims from those who stay, and a public system carrying whatever the private one does not.
Have you dropped your health insurance, or thought hard about it at renewal time this year? Tell us what tipped the decision in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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