Why Aren’t More Kiwis Prioritising Private Health Insurance? Could fringe tax benefits be a blocker?

New Zealanders are no strangers to insurance, whether it’s protecting their homes, cars, or belongings. But when it comes to health insurance, Kiwis seem to lag behind.

The most common insurance held by Kiwis is home insurance, followed by car insurance and lastly, health insurance. Home insurance is winning in the polls due to the fact that many mortgage lenders will require home insurance to be taken out on the property as a condition of their lending. But New Zealanders are twice as likely to have car insurance than health insurance. On average, Kiwis go to the doctor once a year but only 1 out of every 15 Kiwis will claim on their car insurance in a given year. Seeing as you are much more likely to get sick than have an incident in your car, it is surprising that Kiwis as a whole give car insurance more value than health cover. The numbers don’t lie: health issues are far more common than car accidents, yet many still overlook the importance of private health cover.

How Does NZ Compare to Other Countries?

In countries like the UK and the US, private health insurance is far more prevalent. But many of these policies are provided through employers as part of the remuneration package. In England, 80% of policies are provided by employers, while in America, half the population has private health cover through their workplace. These systems make healthcare more accessible and reduce the burden on public health services.

So why isn’t this the norm in New Zealand? One major roadblock, as identified by the Financial Services Council, is Fringe Benefit Tax (FBT). FBT is a tax that employers in New Zealand pay on certain non-cash benefits they provide to employees such as company cars, gym memberships, or private health insurance. The idea behind FBT is to ensure that employees don’t receive tax-free perks that would otherwise be considered taxable income. How does FBT affect health insurance? If an employer offers private health insurance as part of an employee’s remuneration package, the cost of that insurance is subject to FBT. This means the employer must pay an additional tax (63.93% for most benefits as of writing this, July 2025) on the value of the health insurance premium. If health insurance were exempt from FBT, we could see a significant increase in workplace-provided cover, just like in other developed nations. The Financial Services Council are continuing to engage with Ministers and policy makers on these issues to advocate for policy reform based on the research they are conducting. You can read their full report on their website here.

The Benefits of Private Health Insurance

While New Zealand’s public healthcare system does a commendable job, it’s no secret that waiting times for non-urgent procedures can be lengthy and that treatment options for conditions such as cancer, can be limited. Some of the top motivators for getting private health cover include:

• Faster access to specialists and treatments - Skip long public waiting lists.

• Choice of healthcare providers - Pick your preferred doctors and hospitals.

• Cover for non-Pharmac funded medications - Access treatments not fully subsidised by the government.

• Preventative care - Many policies include wellness benefits like dental, optical, and GP visits.

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For a deeper dive into the benefits of private health cover, have a look at our article here. 5 Benefits of health insurance that might surprise you

Is It Time to Rethink Your Priorities?

At Naked Finance, we believe in making insurance simple and accessible. Whether you’re considering health cover for yourself or exploring options for your employees, it’s worth weighing the long-term benefits.

Could a change in FBT rules be the key to unlocking better health coverage for Kiwis? Perhaps. But in the meantime, taking control of your health insurance now could save you time, money, and stress in the future.

Have you considered private health insurance? Let’s start the conversation.

Contact the team