Report

Health premiums are up 15 to 30 percent in two years, and the Reserve Bank is now testing what insurers can absorb

Source: RBNZ, 2026 Banking and Insurance Stress Tests - Scenarios

For the first time the Bank has ordered the 3 largest health insurers, alongside the 5 largest life insurers, to work backwards from their own failure. No policy changes because of it. The squeeze it is testing for, steeper premiums and narrower cover, is already on renewal notices.

By Henry Smith · Insurers · 2026-06-30

What this means for you Late in 2026 the Reserve Bank will publish what the eight biggest life and health insurers say could push them below their legal capital cushion, the first exercise of its kind to include health cover. The sharper signal sits with health: the regulator is now formally testing whether a sector that has raised premiums 15 to 30 percent in two years can keep absorbing claims growth.

Written by Henry Smith · Reviewed by Smiths Insurance & KiwiSaver, licensed Financial Advice Provider (FSP712931)

New Zealand's health insurers have raised premiums by 15 to 30 percent over the last two years. That is the Reserve Bank's own figure, not a customer complaint (RBNZ, May 2026). Keep the low end of that going and the price of cover doubles in about ten years. Keep the high end going and it doubles in just over five.

The Bank is concerned enough to have done something it has never done before. It has told the three largest health insurers, alongside the five largest life insurers, to work backwards from their own failure and write down the chain of events that would get them there. Answers were due in July, and the findings are published in the last three months of 2026 (RBNZ, June 2026).

The Bank has not said which eight. We name them below, from the companies' own public statements. That list is ours, not the regulator's.

What does this mean for my cover?

Nothing changes on any policy because of this exercise. A modelled failure is the point of it, not a forecast about any insurer.

What customers do feel is the pressure the test is aimed at. The May report quoted above records that health insurers are already responding to claims growth by trimming benefits, negotiating harder with providers, and adding co-payments, where the customer pays a fixed share of a bill, plus ceilings on what the insurer will pay for a given fee. That redesign is the quiet half of a premium rise. The number on the renewal notice goes up, and what the policy buys can narrow at the same time.

Why health insurers are the real target

Insurers got no script for this test, only design rules. Health insurers got tighter instructions in the same Bulletin, because of "ongoing concerns that claims costs may increase at a rate exceeding wage growth and general inflation". That trend, the Bank says, "may place sustained pressure on profitability and create uncertainty regarding the adequacy and acceptability of premium increases for policyholders and employers". The same May report records that the Bank has also put the sector under "a period of more intensive supervision", meaning closer and more frequent scrutiny, a step it flagged in November 2025.

The insurers' own accounts show what is pushing premiums up.

Insurer	What its accounts show
Southern Cross, 2025 financial year	Claims took 94 cents of every premium dollar, $1.706 billion paid out on $1.811 billion collected, and health insurance still ran a $56.9 million shortfall, about 3.1% of premiums on our arithmetic (Southern Cross, 30 September 2025)
nib New Zealand, first half of 2025	Premiums grew 12.1% to $218.0 million, claims costs rose 17.6%, members used their cover 9.3% more than the year before, and the underlying result went from a $13.0 million profit to a $10.9 million loss (nib)

The regulator is not asking health insurers to imagine some exotic catastrophe. The tighter instructions point at the slow one already running: claims growing faster than premiums can decently chase.

What is a reverse stress test?

A normal stress test hands every insurer the same imagined disaster and asks how well they survive it. A reverse stress test fixes the ending instead. The ending is that the insurer's spare capital falls below the legal minimum, a cushion called the solvency margin. Each insurer then writes the severe but believable chain of events that gets it there.

The Bank tried this on banks in 2024. Several found that no single event broke them, only a combination did (RBNZ, November 2024). Expect the insurers' answers to look similar: chains of events, not one disaster.

The only previous life insurance test, in 2022, ran the usual way round: one shared scenario, an economic shock plus long COVID and a new pandemic. All five insurers stayed solvent, but by year three their combined solvency margin was "over 50% lower" than in normal conditions, while still sitting "well above the regulatory minimum of zero" (RBNZ). That test showed a brutal shared storm burning through roughly half the sector's cushion. This one asks each insurer to invent the storm that burns all of it.

So who are the eight?

The Bank's three-year testing plan, published on 13 April 2026, sets the guest list without naming anyone. It covers "the five largest life insurers that participated in the inaugural 2022 Life Insurance Industry Stress Test, plus the three largest health insurers for the first time" (RBNZ). That makes the life five already public, and the health three all but name themselves.

Panel seat	Insurer	Why we put them there
Life, all five	AIA, Asteron Life, Chubb Life, Fidelity Life, Partners Life	Named by the Bank as the 2022 participants, and the 2026 plan makes those the life panel (RBNZ)
Health, largest	Southern Cross	Calls itself "New Zealand's largest health insurer", with 951,808 members (Southern Cross, 30 September 2025)
Health, second	nib, our inference	Publishes no rank. We place it by elimination and by size, on the half-year premium figure above, far more than UniMed collects and far short of Southern Cross
Health, third	UniMed	Announced in June 2024 that it had become "New Zealand's third largest health insurer, with 10% of the market and more than 140,000 members" (UniMed via Scoop, 5 June 2024)

UniMed's figures show how much of the country this panel covers. If 140,000 members is 10% of the market, the whole market is roughly 1.4 million insured people, and Southern Cross and UniMed together account for about 78% of it before nib is counted. That is our arithmetic on published figures.

On the life side, the May report singles out income protection sold to individuals as the biggest drag on the sector's returns, driven by rising mental health claims, and expects insurers "to proactively assess the long-term sustainability" of those products.

So what does this actually mean for me?

For anyone holding health insurance, the squeeze the Bank is testing for is already in the market. Premium rises on the scale set out above, thinner benefits and new co-payments are the sector's answer to claims growing faster than wages, and the Bank has flagged a live question over whether customers and employers will keep accepting increases. Nothing in this test changes that either way, but it does say the regulator now treats the question as a stability issue rather than a pricing gripe.

For anyone holding income protection, the product-level review the Bank has asked for is about the policy you own. Reviews of that kind usually surface at renewal or in the terms offered to new customers, rather than reaching back into cover already in force.

For everyone on the panel's books, the late-2026 publication will be the frankest public statement yet on which risks the largest insurers believe could break them. That is a different lens from a financial strength rating, which grades an insurer as it stands today, and the two can be read side by side against our financial strength tool.

What couldn't we check?

The Reserve Bank's website blocked our direct retrieval with a 403 error. We read the Bulletin, the three-year plan, the May 2026 Financial Stability Report and the 2023 results bulletin through a text rendering of the same web addresses, and every quote is as it appeared there.

The Bulletin carries no publication date, and we found no dated listing or coverage of it. We can only place it in June 2026: after the May report said scenarios were coming, and before the July deadline.

The list of eight is ours, not the regulator's. No 2026 Reserve Bank document names a participant. Southern Cross and UniMed hold their seats on their own self-descriptions, and UniMed's market share and member count date from June 2024 and may have moved. nib's seat is our inference by elimination and size, because it publishes no rank. AIA and Partners Life sell health cover too, so a seat could differ if the Bank ranked insurers across licence types, though both firms are on the panel as life insurers anyway.

The Bulletin does not say how the solvency outcome is defined for each insurer, which date's accounts are tested, or whether the late-2026 publication will name individual insurers or report only sector totals. The 2022 results were published as totals only. Our doubling sums assume the last two years' premium growth simply continues, which nobody has forecast.

What this means for your cover

Financial strength, published benefit limits and who underwrites which brand, side by side. Compare New Zealand insurers

Sources

Every source below was read and checked on 21 August 2026.

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