Report
80,770 Dropped Hospital Cover. The Hard Part Is Getting It Back
Source: Financial Services Council, the overlooked role of insurance
An industry-funded report counts 80,770 New Zealanders who ended the cover that pays for hospital treatment, as the average claim per member climbed 75% in four years. What the report never mentions is that cancelling hands back the health history your insurer has already accepted.
By Henry Smith · Health system · 2026-08-14
What this means for you If you hold health insurance, the claims insurers pay out per member have been rising roughly 15% a year since 2021, and that is the cost pressure premiums have to absorb at each renewal. Cover held through an employer sits on a different footing, because the employer decides whether it continues, and the relaxed health questions that came with joining the group scheme end when the job does. For anyone who cancels a policy and buys again later, the health history an insurer has already accepted is lost, so anything a doctor finds in the gap can be treated as a pre-existing condition on the new policy.
Last year 80,770 New Zealanders ended major medical cover, the part of a health policy that pays for hospital treatment and surgery. The count comes from a report commissioned by the insurance industry's own trade body (Financial Services Council, 14 August 2026), and it is the figure worth carrying around, because dropping that cover is easy and getting it back is not.
When you first take out a policy, the insurer accepts your health history as it stands on that day. Cancel, and you hand that acceptance back. Anything a doctor finds while you are uninsured can be treated as a pre-existing condition on the next policy, and the next insurer can decline to cover it. A cancellation is rarely a pause. For a lot of people it turns out to be a one-way door.
The pressure pushing them through it is in the same report. The average health claim paid per member reached $1,921 in 2025, 75% higher than in 2021. Claims are what premiums pay for.
What this means if you hold cover
Two things, at the level of the whole insured population rather than any one household.
The first is that the costs sitting behind your premium are rising at roughly 15% a year, and premiums have to absorb that at each renewal.
The second is the order of the options if the price gets hard. Lifting the excess, the slice of a claim you pay yourself before the insurer pays, or trimming the everyday and optical parts of a policy, keeps the health history your insurer has already accepted. Cancelling is the only move on that list that hands it back.
Where the numbers come from
The Financial Services Council is the industry body for New Zealand's insurers and fund managers. On 14 August 2026 it published a summary of a report it paid for, written by the Wellington consultancy MartinJenkins. Five figures came out of it.
| What the report says | The figure |
|---|---|
| Average health claim paid per member, 2025 | $1,921, up 75% since 2021 |
| Share of insured people cancelling a policy | 7% in 2022, rising to 9% in 2025 |
| People who ended major medical cover | 80,770 |
| Adults holding private health insurance | 35% |
| Insured New Zealanders covered through a workplace or group scheme | 43% |
All five figures as published by the Financial Services Council.
Who paid for it matters. The council's members are the insurers whose products the report is about, and it commissioned the research itself. The same page lists what it wants from the next government, including scrapping fringe benefit tax on employer-bought health and life cover, which is the tax an employer pays on perks it gives staff. Read the figures on that basis. We have not spoken to anyone at the council or at MartinJenkins. We read the published page, where chief executive Kirk Hope is quoted saying "health insurance is being used more, claims are rising, treatment costs are rising, and households are feeling it".
How fast the cost is really rising
The council's page gives the finish line and the size of the climb, which is enough to work backwards to the start. If $1,921 is 75% above the 2021 figure, then 2021 was about $1,098. The average claim paid per member grew by roughly $823 in four years, which is about 15.0% a year, with each year's rise building on the one before it.
That is the number to hold on to. An insurer watching the average claim grow at that pace cannot keep premiums still for long. The report prints both figures in the same list and puts a yearly rate on neither.
Are people dropping cover because it got expensive?
The honest answer is that these figures cannot tell you. What they can give you is a ceiling.
If the 80,770 people ending hospital cover is the 9% rate, then the same group at 2022's rate of 7% would have been about 62,821 people. The rise in the rate is therefore worth about 17,949 people a year, and every percentage point on it is roughly 8,974 people.
That 17,949 is the most that rising costs could explain, because it is the entire increase. Pinning all of it on affordability would mean nothing else changed between 2022 and 2025. Not the age of the insured population, not employment, not how many new policies were sold, not the mix of hospital cover against everyday plans. None of that is published, so the true share sits somewhere between none of it and all of it.
Our arithmetic on the figures published by the Financial Services Council on the page cited above. It assumes 80,770 is the count that goes with the 9% rate, which the report does not state.
The 43% who do not make the decision
The most important figure on the page gets the least attention. It is that 43% of insured New Zealanders hold their cover through a workplace or group scheme.
That splits the affordability question in two. For roughly 57 in every 100 insured people, a price rise lands on the household budget, and cancelling is their own decision. For the other 43, the decision belongs to an employer, and what triggers it is a budget review or a job change rather than a tight month at home. A single cancellation rate covering both groups is an average of two very different mechanisms.
It also explains the tax ask, because fringe benefit tax sits on the channel carrying 43% of insured lives. Modelling by NZIER, an economic consultancy, for the same council estimates that removing it would bring about 201,408 extra people into employer-sponsored health cover, which is more than ten years' worth of the extra cancellations above. Inland Revenue has objected to the proposal, as reported by Insurance Business NZ, 12 August 2026. We set out that arithmetic in employer-sponsored health insurance and the fringe benefit tax rate.
What this leaves you with
If you pay for your own cover, that 15% a year sits on top of the age loading, the extra you are charged for being a year older. The two stack at renewal. Our guide to health insurance cost by age covers the age part.
If your cover comes through work, the exposure is different and larger than most people assume. Group schemes usually skip or soften the health questions when you join, and that concession does not travel with you. The window to move onto your own policy is short, and it shuts on the day the job does.
And whichever of those two groups you are in, the 80,770 people who ended hospital cover did the one thing on the list that cannot be reversed on the old terms. Every other way of getting the price down leaves the door open behind you.
Can you trust these numbers?
Up to a point, and here is where they stop.
We could not read the full MartinJenkins report. The link to it on the council's page returned a 404 error when we requested it, so every figure here comes from the council's summary of its own commissioned research rather than the research itself. We could not check the definitions, the data sources, the sample, or which insurers are included.
We also do not know what the 80,770 is made of. The page does not say how many were hospital policies against other products, whether it counts people or policies, or whether someone switching insurers counts as a cancellation. It never gives the total number of insured people either, so there is no headcount to check the 9% against.
Two of the percentages are measured differently. The 35% is a share of adults. The 43% is a share of insured New Zealanders of every age. We have not multiplied one by the other, because the report does not say the workplace share among adults matches the all-ages share.
Finally, the timelines do not line up. The claims figure runs 2021 to 2025 and the cancellation figures run 2022 to 2025, so any rate built by putting them side by side carries that mismatch.
What this means for your cover
Public waiting lists and what private treatment costs are the two numbers health cover is bought against. Health insurance in New Zealand
Sources
Every source below was read and checked on 21 August 2026.
- Financial Services Council, the overlooked role of insurance in New Zealand's health system, the summary of the commissioned MartinJenkins report and all six headline figures, 14 August 2026, retrieved 20 August 2026
- Financial Services Council, MartinJenkins insurance and health report, the full report link published on the page above, which returned a 404 error when requested on 20 August 2026
- Insurance Business NZ, group insurance FBT proposal faces documented government opposition, the NZIER modelling for the FSC and Inland Revenue's stated objection, 12 August 2026, retrieved 20 August 2026
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