Health insurance is now New Zealand’s most disputed financial product

A record with no excuse

For years, the biggest spikes in insurance complaints came with a weather event attached. The Auckland floods and Cyclone Gabrielle drove the 2023/24 record. This year there is no such excuse, and the numbers are worse.

Health insurance disputes surged 91% in the year to June 2026, making health cover the single largest category of disputes investigated by the Insurance and Financial Services Ombudsman Scheme (IFSO) for the first time. It has overtaken house and motor vehicle insurance, which historically dominated the complaint tables.

The IFSO completed a record 833 dispute investigations over the year, up 46%, and handled 3,977 cases in total including 2,602 complaints. More than 92% of disputes accepted were insurance-related, and payouts to consumers topped $1.39 million. As IFSO Ombudsman Karen Stevens put it, “while there have been no recent major natural disasters driving complaint volumes, we continue to see record levels of disputes”.

The problem is the fine print

Stevens was blunt about what is going wrong. “Many of the disputes we considered involved disagreements about policy exclusions, benefit eligibility, limits, or changes to policy terms,” she said. “Consumers generally do not realise how those factors affect their cover until they need to make a claim.”

That is the whole story in one sentence. People buy peace of mind, then discover at the worst possible moment that their cover doesn’t stretch as far as they assumed. Rising healthcare costs and a strained public system are pushing more people into private cover, and then into disputes when that cover underperforms.

The pattern is not a one-year blip. IFSO disputes have tripled from 285 in 2022 to 833 this year. Health, life and disability climbed from 21% of the total in 2023/24 to 29% in 2024/25, before health alone took the top spot outright this year. This is sustained acceleration, not statistical noise.

Not just one ombudsman

The other approved dispute resolution scheme tells the same story. FSCL investigated 532 disputes in 2025/26, a 49% increase and its highest since 2010. FSCL Financial Ombudsman Susan Taylor called it “the sharpest increase in complaints in 15 years”, blaming economic stress, debt, and the growing use of AI to lodge complaints.

AI cuts both ways, Taylor noted. “It makes our service more accessible to people who may have felt reluctant, but the disadvantages are in that sometimes the complaints can be very lengthy. Sometimes it gives them the wrong information.” Either way, the volume is climbing fast.

FSCL’s own breakdown found the leading dispute type was “advice” – consumers arguing policy wording was unfair or misapplied. Taylor’s message to insurers was direct: communicate clearly what policies cover and exclude. That obligation sits squarely with whoever sold or recommended the policy.

Why HR teams should be worried

Health cover has become an employer tool. In 2023, the Financial Services Council found 37% of New Zealanders had health cover, up from 32% the year before, with 1.45 million people insured, with peace of mind the most common reason cited. As public wait times stretch, businesses have leaned harder on private cover to attract and retain staff.

That is where the 91% surge becomes a workplace problem. When an employee hits an exclusion they never knew about and ends up in a dispute, the benefit sold as goodwill becomes a source of friction, and the employer who promoted it absorbs some of the reputational hit. Stevens’ observation about consumers not understanding their cover applies just as sharply to staff enrolled in a group scheme they never read.

The regulator is already circling

Insurers cannot assume this stays quiet. The FMA’s second annual Financial Conduct Report, released in July 2026, named product design, complaints data and fraud detection as focus areas, and recorded nearly $29.8 million in penalties and enforceable undertakings against NZ insurers in the prior 12 months. The FMA found that only some insurers have comprehensive complaints policies and that using complaints data to improve products “remains inconsistent across the sector.”

The fix is unglamorous but obvious. Explain the exclusions before the claim, not after. Insurers, brokers and HR teams that get the upfront communication right will spend far less time in front of an ombudsman than those who keep hoping nobody reads the fine print. On current numbers, that hope is running out.

Sources

• Health sector becomes most complained about to financial ombudsman for first time (2026-09-24)
• NZ dispute volumes break records as insurer complaints hold at two-year high (2026-07-23)
• What’s behind the surge in financial complaints? (2026-07-23)
• Ombudsman cautions industry on advice failings (2026-07-27)
• What the FMA is watching in insurance for 2026/27 (2026-07-25)
• Accessible and affordable healthcare – FSC Insights and Trends (2024-04)