The Growing Divide: Why Private Medical Claims Are Surging in New Zealand

It feels like there is another headline about our public health system being under pressure every week. Long waitlists, staff shortages, and hospitals struggling to keep up. It is no surprise that more Kiwis are turning to private healthcare to get the treatment they need and faster.

But the big rise we are seeing in private medical claims is not about people choosing luxury or convenience, it is because the public system simply cannot cope. When urgent cases can’t be treated quickly, Health NZ now outsources many of these procedures to private hospitals. Around 10% of elective surgeries are now done privately. This adds even more demand to the private system, driving up costs across the board.

The Supply and Demand equation is ultimately what determines the price our private health system can charge. And right now, demand is winning. After years of underinvestment; New Zealand has historically spent just over 9% of GDP on health throughout the 2010s, well below countries like Australia at around 12%. Our system is struggling to keep up. Combine that with an ageing population and our ACC model and you’ve got a perfect storm where demand for private care far outweighs supply.

As the pressure mounts, private hospitals and specialists can now charge more, and insurers are footing the bill. With more Kiwis turning to private care to avoid long public waitlists, claim volumes have soared, especially for diagnostics, oncology, and orthopaedics. This sharp rise in demand is pushing treatment costs higher year after year. Insurers are caught in the middle and for clients, that means the true cost of our public health system’s shortfall eventually lands in their laps through rising premiums.

Why Are Premiums Rising So Fast?

Private medical claims have jumped around 25% per year over the last three years, putting insurers under real pressure. Many making substantial year on year losses. Claims are increasing faster than premiums, and something has to give.

Premium Increases

Many insurers have increased their base rates by 25–40%, depending on the plan and age group. On top of this, health insurance premiums automatically rise as you get older, because the risk of needing treatment increases. It’s not just inflation; it’s a combination of claim volume and age-based risk.

Policy Changes

Some insurers on specific plans have the ability to alter their policy wording. Which they are changing to manage costs. These have included: 

• Reducing certain benefits
• Changing or narrowing definitions
• Adding new co-payments on top of your excess

We’ve already seen examples of this, and it’s a good reminder that not all health policies are created equal. Regular reviews are essential to make sure your cover still fits your needs.

What Can You Do About It?

Here’s my advice to clients navigating these changes:

Stay Informed

The more knowledge you have the better. Lifetime is hosting a Webinar on Tuesday the 11th of November at 6pm on what we are seeing in the Private Medical space. Please click on the link below if you would like to register to attend.

Register Here

Review your cover regularly. 

A quick check-in can make sure your plan is still competitive and fit for purpose.

Look at your excess. 

Increasing your excess can make premiums more affordable while still keeping great protection in place.

Ask about guarantees. 

Some insurers offer a Guarantee of Renewability, meaning your benefits can’t be reduced in the future.

And most importantly, don’t make changes without advice. Every insurer has different strengths, and cheaper isn’t always better when it comes to your health.

At Lifetime, we work with New Zealand’s leading medical insurance providers so we can help you find the plan and provider that suits your situation best.

With the public health system under more strain than ever, private health insurance is no longer just a “nice to have” it’s peace of mind that you can access care when you need it most.

If you’d like to review your current medical cover or understand how rising costs may affect you, get in touch with us. 

Article by Emily Wheatley

This article is for general information purposes only and does not constitute financial advice. The content is based on information current at the time of writing and may be subject to change.

Lifetime Group Limited is a licensed Financial Advice Provider. For advice specific to your situation, please speak with a Financial Adviser. You can view our Disclosure Statement here.

All investments involve risk and are not guaranteed. Any examples or projections are for illustration only and should not be relied on as advice.