New Zealanders are cutting back on their health insurance, just as the amount being paid out in health insurance claims increases.

A report commissioned by the Financial Services Council showed 9 percent of people with health insurance terminated their policies last year, up from 7 percent in 2022.

At the same time, the average health insurance claim paid per member increased from $1097 in 2021 to $1921 in 2025.

"The evidence shows insurance is already providing billions of dollars of funding, expanding access to care and protecting families from the financial consequences of illness and death. The opportunity for government is to recognise and strengthen that contribution as part of a more resilient New Zealand health system," Financial Services Council chief executive Kirk Hope said.

Health insurance premiums have risen sharply recently, up almost 75 percent in the past five years alone.

Hope said it was problematic that, as health insurance usage was increasing and treatment costs were rising, households were struggling with the cost of cover.

"Just as New Zealand needs every part of the health system working better together, people are cutting back the very cover that helps them access care sooner."

People who completely dropped their health insurance would usually need to go back through the underwriting process to take it out again, which could mean pre-existing conditions were not covered.

About 35 percent of adults have private health insurance.

Of those, 43 percent are covered through an employer or group scheme.

Hope said the Government could help by removing fringe benefit tax from employee-funded insurance.

"It's a very effective way, it's community-rated and it's not underwritten so it's a very effective way for people to get access if the employer is providing low-cost or no-cost health insurance for them, but it's very expensive for employers because they have to incur a 50 percent to 70 percent tax on premiums."