The Insurance and Financial Services Ombudsman managed 170 health insurance-related disputes in the year to June – 91% more than the previous year.
Speaking to the Herald, ombudsman Karen Stevens attributed part of the rise to insurers acting on clauses that allow them to limit the amount they spend on a claim to what they deem to be “reasonable”.
Stevens said that, in the past, insurers would effectively waive “reasonable charges” clauses. However, as medical costs rise, insurers are leaning on the clauses to limit their payouts.
For example, the ombudsman dealt with an unhappy claimant last year whose insurer would cover only $8001 of the $12,564 spinal surgery he needed.
The insurer relied on the policy clause saying it would pay “reasonable charges” for the procedure, defined as charges the insurer deemed reasonable based on a review of its data.
The claimant found two other surgeons, but their fees were also above $8001, so he asked the insurer to either pay the full amount or find him a surgeon who could do the procedure for a “reasonable” price.
The insurer said no, so the claimant complained to the ombudsman, who ended up siding with the insurer.
The insurer explained that it capped its cover at $8001 because that was the median price it observed for such surgery over the previous 10 months.
The ombudsman decided the insurer “exercised its discretion reasonably, based on the relevant legal test” so didn’t uphold the complaint.
Insurance expert and Chatswood Consulting managing director Russell Hutchinson believed the ruling was unfair and the insurer should have specified in its policy that it would look at the median cost of a procedure when determining whether it was “reasonable”.
Like Stevens, Hutchinson’s observation was that insurers, which had previously not acted on their “reasonable charges” clauses, were doing so more now.
He said they were also increasingly capping the level of coverage.
He believed it was better for people to know how much of a procedure they would have to pay for than to be at the whim of an insurer’s discretion.
In its 2025 annual report, Southern Cross Medical Care Society Group explained that, while general inflation had abated, it continued to operate in a tough environment.
“New Zealand’s ageing population, worsening chronic health conditions, a shortage of healthcare professionals, rising medication prices and ongoing investment into new technologies, all contribute to the increase in the volume and price of healthcare treatments,” it said.
Southern Cross said its members’ claims costs increased by 12.2% over the year – a rate above its pre-pandemic long-term average of 6.5% a year.
It noted members were making more claims than before the pandemic, with 52% submitting at least one claim over the past year.
Hutchinson believed rising premiums were front of mind for insurers, which were wary that, if premiums rose too much, they would lose customers.
Stevens was also conscious of the cost of living and the discontent that came with people feeling under financial pressure.
She believed this was another factor behind the jump in disputes received by her organisation, as was the fact that artificial intelligence (AI) made it easier for people to lodge complaints.
On one hand, she believed it was good that AI made the ombudsman scheme more accessible. But on the other hand, it came with challenges, as people were less inclined to talk matters through over the phone, and the advice they received from AI could be misguided.
The Insurance and Financial Services Ombudsman investigated 833 disputes over the year to June – 46% more than the year before.
In addition to health insurance, which saw the biggest jump, the disputes it investigated related to general insurance, life insurance, investments and financial advice.
Of the 833 disputes, about an eighth were either partially or fully upheld or settled.
The Banking Ombudsman similarly saw a jump in the number of disputes it investigated. It also cited the cost of living and AI as driving the rise.
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