WHY YOUR HEALTH INSURANCE PREMIUM IINCREASE WAS SO HIGH!

Health Insurance Premium Increases, Higher Than Expected

If you have health insurance you will be aware the premium increases were much higher than normal. The reason, is inflation. Inflation, I'm sure you know, is the reason why the prices of everything rise each year. Inflation is caused by many things including supply and demand, cost of materials and even imports. Your health insurance premium increase is not immune to these pressures.

Medical Inflation vs. Normal Inflation

In December 2024, New Zealand’s general inflation sat around a modest 2.2%. Meanwhile, medical inflation soared from 7.4% in 2024 to a staggering 14.5% in 2025—one of the highest jumps in the Asia-Pacific region. Medical costs are rising at nearly seven times the pace of general inflation. This is why health insurance premiums seem to increase more than your other bills.

$100 spent on medical services in 2023, it would only buy you $93.11 in 2024. Midway through 2025 it is only buying services worth $81.32. This is one of the highest in the world and certainly in the Asia-Pacific region.

This means that insurers are having to spend $124 in 2025 to match $100 spend in 2023. You can imagine that this is puting a strain on insurers cash reserves.

Massive Premium Increases Across Insurers

If you have had a recent increase, or are due an increase on your health insurance premium then you are not alone. All of the insurers have put what feels like inflation busting price hikes onto their health policies. AIA and Southern Cross acted early with a 17% and 21% increase respectively. Partners Life announced in June a 20% rise in health insurance. They were followed by Accuro with 40% coming into effect on September 1st. Finally NIB will be increasing premiums upto 33.6% on some policies.

If you get your health insurance through your employer, these increases will also impact those premiums too.

If you haven't had your increase yet it will come with your renewal letter over the next year. It's causing a great deal concern.

So Why Is Medical Inflation So High?

Demand explosion: There is still a backlog being worked through from the treatments delayed through COVID. In addition more people are using their policies and using them sooner.

Strained public health system: As reduced funding hits the public system and waiting times increase, more people are looking to private care. These are not all through insurance. The result is increased demand and increased prices.

Escalating treatment costs: The costs of everything is ballooning, whether it's diagnostic tests, surgeries or medicines (not just non-Pharmac funded). As technology and medical advances continue to improve our health outcomes it does come at a price. It's not just the existing treatments that are costing more.

Aging population: The population is living longer, but not necessarily healthier. The result is greater numbers of medical interventions are required and the demand increases.

Reserve exhaustion: The insurers have been softening the blow. They have been taking the strain and hoping that things would turn around. As medical inflation is still increasing they could no longer continue to do this.

Some Context on a Global Scale

This is not just a New Zealand problem. Around the globe developed countries have been seeing double digit medical inflation. At the bottom of the world we are feeling the same economic shock waves but due to comparitively slow economic growth we are feeling it a bit more than other nations.

Cover Yours Ltd (FSP769531) and Marc Hamilton (FSP306046) are registered Financial Service Providers and you can search the register here. Marc Hamilton is a member of the FSCL Disputes Resolution Scheme. Cover Yours Ltd's disclosures can be found here or by emailing hello@coveryours.co.nz