14 August 2026
New Zealanders are increasingly using private health insurance, but more households are also cancelling their cover as the cost of treatment rises and household budgets remain under pressure.
New analysis commissioned by the Financial Services Council shows the average health insurance claim paid per member increased from $1,097 in 2021 to $1,921 in 2025, a rise of about 75 percent.
At the same time, the proportion of insured people terminating their health insurance increased from 7 percent in 2022 to 9 percent in 2025.
The number of people ending major medical insurance reached 80,770 over the same period.
The figures reveal an uncomfortable trend.
Private health insurance is being used more heavily at a time when some New Zealanders appear increasingly unable or unwilling to keep paying for it.
That matters because the public health system is also under pressure from waiting times and growing demand. The Government’s current health targets include getting 95 percent of patients through first specialist assessments and elective treatment within four months, reflecting the importance being placed on reducing delays.
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Claims rising much faster than households would like
The MartinJenkins analysis, commissioned by the Financial Services Council, argues that private health and life insurance already make a substantial contribution to New Zealand’s wider health system.
FSC chief executive Kirk Hope said the discussion should not be framed as public healthcare versus private healthcare.
“The evidence shows insurance is already providing billions of dollars of funding, expanding access to care and protecting families from the financial consequences of illness and death,” Hope said.
His argument is that private insurance should operate alongside the public health system rather than replace it.
But rising claims also tell another story.
If the average amount paid per insured member has increased by 75 percent in four years, insurers are facing significantly higher treatment costs and utilisation.
Those pressures eventually matter for premiums.
And when premiums rise, households have to decide whether private insurance remains affordable.
More people are walking away from cover
In 2025, 9 percent of people with private health insurance terminated their policies, according to the report.
That compares with 7 percent in 2022.
Hope described the situation as a growing problem.
“Health insurance is being used more, claims are rising, treatment costs are rising, and households are feeling it,” he said.
For many families, health insurance sits in an awkward part of the household budget.
Unlike rent, mortgage payments, electricity or groceries, it can be cancelled.
But unlike some discretionary spending, cancelling it can have major consequences if somebody later needs surgery or specialist treatment.
That makes private health insurance particularly vulnerable during periods of financial pressure.
People may understand its value but still decide they cannot justify the monthly premium.
Public healthcare remains available, but waiting can matter
New Zealanders do not need private health insurance to access the public hospital system.
Publicly funded specialist treatment remains available to eligible patients.
But patients may have to wait for specialist assessment or treatment, and the Ministry of Health explicitly notes that people wanting specialist advice more quickly can choose private care.
Waiting times have already been identified as a significant challenge.
The Ministry’s Health and Independence Report noted increasing waits for specialist assessment and elective treatment, alongside growing pressure in emergency departments.
Earlier New Zealand Health Survey results also found more than a quarter of adults reported that the time required to get a GP appointment had been too long and acted as a barrier to care.
That gives private insurance an important role for people who want another route into elective or specialist treatment.
The obvious problem is that the people who benefit most from having another option may increasingly struggle to afford it.
Only around one in three adults has private health insurance
The FSC report estimates around 35 percent of New Zealand adults hold private health insurance.
It says that is below the OECD average.
The report also highlights what it describes as underinsurance in life cover.
Life insurance in New Zealand represents about 0.8 percent of GDP, compared with an OECD average of 3.5 percent, according to the analysis.
Hope put the issue more simply.
“We are still much more likely to insure our cars and contents than ourselves,” he said.
That comparison will probably resonate with many households.
Car insurance is often treated as essential.
Contents insurance is widely considered prudent.
Health and life insurance can feel easier to postpone because their benefits may not be immediately visible.
Until something goes wrong.
Workplace insurance could become more important
One of the more significant findings in the report is that 43 percent of insured people receive their cover through an employer or another group scheme.
The FSC sees workplace insurance as one of the most practical ways to increase coverage.
Group schemes can potentially spread risk across larger numbers of people and make cover easier to access than purchasing an individual policy.
Hope argues this could prevent health insurance from becoming something available mainly to wealthier households.
“Insurance cannot become a luxury good,” he said.
“If we want private insurance to support the wider health system, access has to broaden.”
This is where the debate moves from insurance industry concerns into tax policy.
FSC wants tax changes for employer-provided insurance
The Financial Services Council is calling for several policy changes ahead of the election.
One of its main proposals is removing Fringe Benefit Tax, or FBT, from employer-provided health and life insurance.
Currently, certain benefits supplied by employers can create a tax liability.
The FSC argues removing that cost from workplace insurance could encourage more employers to offer cover and make it easier for employees to participate.
It is also calling for broader use of shared public-private healthcare arrangements.
A third proposal would allow private insurers access to prices negotiated by Pharmac for medicines and medical devices.
These are not neutral recommendations.
The Financial Services Council represents insurers, KiwiSaver providers, investment companies and other financial-sector businesses.
Its members would potentially benefit if more people purchased insurance.
That does not make the proposals invalid.
But it does mean the recommendations need to be assessed not only as health policy, but also as proposals coming from an industry body with a clear commercial interest.
Would more private insurance actually reduce public waiting lists?
This is the crucial policy question.
The argument in favour is straightforward.
If someone has private insurance and receives surgery privately, they may no longer require the same procedure through the public system.
That could free public capacity for another patient.
But healthcare capacity is not unlimited.
Public and private systems often draw on the same underlying workforce, including surgeons, specialists, nurses and technicians.
If greater private activity simply moves scarce healthcare workers from one part of the system to another, the impact on total national capacity becomes more complicated.
This means expanding private insurance is not automatically the same as expanding healthcare capacity.
The strongest version of the policy would therefore require both systems to grow rather than simply compete for the same people.
55 percent support more public-private cooperation
The FSC also released polling showing 55 percent of New Zealanders believe the Government should prioritise greater use of public and private healthcare working together as demand increases.
The poll was conducted by Curia Market Research between 1 and 4 August 2026 and involved 1,000 respondents.
According to the FSC, results were weighted to reflect New Zealand’s voting adult population by gender, age and area.
The reported sampling error was plus or minus 3.1 percentage points at the 95 percent confidence level.
That suggests a majority is at least open to greater cooperation between the systems.
But the phrase “public and private healthcare working together” covers a very wide range of possibilities.
It could mean publicly funded procedures being performed in private hospitals.
It could mean insurance incentives.
It could mean shared facilities.
Or it could mean government purchasing additional private-sector capacity when public waiting lists become excessive.
Those models have very different financial and equity implications.
The equity problem cannot be ignored
The biggest concern with any greater reliance on private insurance is unequal access.
People on higher incomes are generally better placed to absorb increasing premiums.
Lower and middle-income households have less flexibility.
If private insurance becomes an increasingly important route to timely healthcare while becoming less affordable, New Zealand risks creating a stronger divide between people who can pay for speed and people who cannot.
That is why the cancellation numbers deserve attention.
The issue is not simply whether more claims are being paid.
The issue is who is still able to remain insured.
If the people leaving cover are primarily households under financial pressure, the system could become increasingly concentrated among higher earners and people with employer-sponsored policies.
That would undermine the FSC’s stated objective of preventing insurance from becoming a luxury product.
The public system cannot simply be replaced
There is also a basic reality that should not get lost in the debate.
Private insurance cannot replace universal public healthcare.
Emergency medicine, intensive care, highly complex procedures, public health, mental health services, maternity care and many other areas depend heavily on the public system.
The Government’s own health strategy continues to prioritise shorter waiting times for appointments, operations and emergency care within the public system.
The more realistic question is whether private capacity can be used intelligently alongside it.
That is a very different proposition from privatising healthcare.
Why claims are worth watching
A 75 percent increase in average claims paid per member over four years is substantial.
Part of that could reflect greater use of healthcare.
Part may reflect the increasing cost of procedures, diagnostics, hospital care, specialist fees and medical technology.
Either way, higher claim costs eventually place pressure somewhere.
Insurers can absorb some changes.
Premiums can rise.
Benefits can change.
Excesses can increase.
Or customers can leave.
The cancellation figures suggest some households are already reaching that decision point.
Life insurance is part of the same conversation
The MartinJenkins report also examines life insurance.
Although life insurance does not reduce hospital waiting lists, it protects families financially when a wage earner dies or becomes seriously ill.
The FSC says its members collectively pay $2.8 billion a year in life and health insurance claims.
It argues these payments reduce the financial shock experienced by households and should therefore be considered part of New Zealand’s broader economic and social resilience.
Again, the industry’s commercial interest is obvious.
But so is the underlying risk.
A household that loses its main income because of death or serious illness can face mortgage stress, debt and major changes in living standards.
The question is whether New Zealand has enough people insured against that risk.
The election-year debate is likely to grow
The FSC has placed its proposals into an election manifesto, meaning political parties are likely to face increasing pressure to state where they stand.
Should employers receive tax incentives to provide insurance?
Should private hospitals perform more publicly funded procedures?
Should insurers gain access to Pharmac-negotiated prices?
And should government actively encourage more New Zealanders to purchase private health cover?
There will not be one easy answer.
The best solution may involve greater cooperation in some areas while protecting a strong universal public system.
The real warning in these numbers
The headline finding is not simply that private health insurance claims have increased.
It is the combination of two movements happening at once.
People with insurance are claiming more.
And more people are cancelling their policies.
That suggests private healthcare is becoming more valuable at exactly the same time it risks becoming less affordable.
If that trend continues, New Zealand could end up with a smaller insured population making increasingly expensive claims while the people who drop out place more reliance on a public system already trying to reduce waiting times.
That would be the worst outcome for both systems.
The challenge for the next Government is therefore bigger than deciding whether it prefers public or private healthcare.
New Zealand needs enough doctors, nurses, specialists, theatres and diagnostic capacity to treat people when they need care.
Insurance can help determine who pays for some of that treatment.
It cannot create healthcare workers or hospital capacity by itself.
The FSC is right about one thing.
The debate needs to move beyond a simplistic public-versus-private argument.
But the insurance industry will also need to answer an equally difficult question.
If private cover is going to become a larger part of New Zealand’s health system, how does it remain affordable for ordinary New Zealand families?
That may be the most important number to watch next.
References
Financial Services Council, Kiwis cutting back health insurance as claims rise, media release, 14 August 2026.
MartinJenkins, The role and contribution of insurance in New Zealand’s healthcare, commissioned by the Financial Services Council, 2026.
Ministry of Health, New Zealand Health Targets.
Ministry of Health, Government Policy Statement on Health 2024 to 2027.
Ministry of Health, Health and Independence Report 2024.
Ministry of Health, New Zealand Health Survey 2023/24.
