Over the past few years many of us have noticed a consistent trend - medical insurance premiums are rising faster than general inflation. While this can feel frustrating, the increases reflect significant structural changes occurring across global healthcare systems - including New Zealand.
Understanding what is driving these costs helps explain why premiums are increasing and, importantly, what options are available to manage them.
The reality: Medical costs are rising rapidly
Healthcare inflation is currently running well ahead of normal consumer inflation. In New Zealand, medical inflation rose from 7.4% in 2024 to approximately 14.5% in 2025, placing it among the highest increases in the Asia-Pacific region. Forecasts suggest healthcare costs could continue rising by around 14 - 15% annually, compared with general inflation closer to low single digits. This gap matters because insurers ultimately pay the underlying treatment costs and premiums must adjust to reflect higher claims expenses.
What is driving higher healthcare costs?
Several powerful trends are converging at once.
1. Breakthrough (and expensive) new medicines
Medical science is advancing rapidly, particularly in areas such as:
Cancer immunotherapies
Precision medicine tailored to genetics
Diabetes and weight-management drugs
Advanced biologic treatments for chronic illness
While these treatments can dramatically improve outcomes, they often come with very high price tags. Specialty medications now account for a significant and growing share of healthcare spending globally. Pharmaceutical innovation is cited by many insurers as a major driver of rising medical costs. The challenge is simple: better medicine often costs more, at least initially.
2. Increased use of healthcare services
Following pandemic delays, many elective procedures and diagnostic treatments are now being undertaken, creating a surge in claims activity. At the same time:
Populations are ageing
Chronic conditions are more common
Mental health services usage is increasing significantly
More utilisation naturally leads to higher insurer payouts.
3. Technology and specialist treatment costs
Modern healthcare increasingly relies on:
Robotic surgery
Advanced imaging
Personalised treatment pathways
Digital monitoring and care programmes
These innovations improve outcomes but raise the cost per treatment episode.
4. Industry and insurance trends
Globally, insurers are experiencing:
Higher hospital reimbursement costs
Faster growth in prescription drug spending than overall medical spending
Ongoing pressure to expand policy coverage for new therapies
As claims increase, premiums follow - this is a structural rather than temporary trend.
What this means for your medical insurance
You may notice several industry responses:
Premium adjustments
Regular increases are becoming the norm as insurers reprice policies to reflect rising claims costs.
Coverage refinements
Insurers are increasingly:
Applying treatment limits
Tightening eligibility rules for high-cost drugs
Introducing pre-approval requirements
Greater policy customisation
Policies are evolving toward more flexible benefit structures rather than “all-inclusive” cover.
Practical ways to manage premium costs
The good news is that you have meaningful levers available to control affordability without abandoning cover altogether.
1. Review your excess level
Increasing the policy excess can significantly reduce premiums.
This approach works well where insurance is intended primarily for major or unexpected medical events, rather than routine treatment.
2. Adjust coverage scope
Potential options include:
Removing lower-value add-ons or day-to-day benefits
Focusing cover on surgical and major diagnostic treatment
Limiting specialist or outpatient benefits where appropriate
Targeted cover often provides better long-term value than broad but expensive policies.
3. Reassess optional benefits
Some legacy features may no longer align with current needs or life stage. Periodic policy reviews help ensure you are not paying for benefits unlikely to be used.
4. Maintain cover long term
Reducing cover temporarily can appear attractive during premium increases, but re-entry later may involve:
New underwriting
Exclusions
Age-related pricing impacts
For many of us, adjusting rather than cancelling is the more sustainable strategy.
The bigger picture: Insurance is adapting to medical progress
Healthcare today is more capable than ever before. Treatments that were unavailable - or experimental a decade ago are now routine.
The paradox is that medical success brings financial pressure:
People live longer.
More conditions are treatable.
Expectations of care continue to rise.
Medical insurance is evolving alongside these advances, shifting toward smarter plan design and shared cost management rather than unlimited coverage.
A good time for a policy review
Given the pace of change across healthcare and insurance markets, reviewing medical cover regularly has become increasingly important.
A structured review can help ensure:
Premiums remain sustainable,
Cover aligns with personal priorities, and
Protection remains focused on the risks that matter most.
If you would like assistance reviewing your current policy or understanding available options, please get in touch.