Brokers advising commercial clients on group health and life insurance have a specific policy proposal to track heading into New Zealand’s November election – and a live regulatory cost heading their way regardless of the result. The Financial Services Council’s (FSC) newly released The Prosperity Agenda, its first-ever election manifesto published July 30, calls for the removal of Fringe Benefit Tax (FBT) from employer-provided health and life insurance. If enacted, that single change would alter the economics of employer-funded cover at a time when premium escalation is already prompting businesses to scale back group schemes. The manifesto spans 21 proposals across retirement savings, healthcare, and regulatory reform, but the FBT measure is the one with the most direct commercial consequence for insurance distribution.
Under current New Zealand law, employer payments toward an employee’s health insurance or life insurance are classified as fringe benefits, attracting FBT paid by the employer. That tax treatment adds to the effective cost of group cover – a friction point the FSC argues is suppressing uptake. The FSC is not the first to raise the issue, but the proposal has not yet been legislated. Budget 2026’s FBT changes focused on motor vehicle rules, with Inland Revenue having consulted on broader FBT improvements in early 2025. Health and life insurance premiums did not feature among the measures enacted. The FSC is now explicitly placing FBT removal on the election table, framing it as an affordability lever rather than a sector concession.
The market context gives that framing weight. Aon’s 2026 Global Medical Trend Rates Report forecasts New Zealand employee medical plan costs will rise 18% in 2026, well above the Asia-Pacific average of 11.3% and global average of 9.8%. The forecast reflects continued pressure on employer-sponsored health benefits from rising healthcare utilisation and treatment costs. At those rates, employers funding group cover face a compounding cost problem. FBT removal would reduce the effective cost of employer-funded policies without requiring any change to premium pricing, giving brokers a stronger commercial case when recommending group schemes to business clients.
A less-discussed but commercially significant proposal in the manifesto is insurer access to Pharmac-negotiated drug pricing. Some cancer treatments and newer medicines are not funded by Pharmac, leaving patients who seek access to those treatments reliant on private funding arrangements or insurance cover where available. The cost of some non-Pharmac-funded medicines can run into tens or hundreds of thousands of dollars, depending on the treatment and duration of use.
The FSC has proposed allowing insurers access to Pharmac-negotiated pricing for certain medicines, arguing this could improve affordability and expand access to non-Pharmac drug cover. Whether any savings would flow through to premiums or broader policy benefits would depend on how such a framework was implemented. For brokers, the issue highlights the growing importance of non-Pharmac drug benefits as clients assess the value of private health insurance.
The FSC’s call for expanded public-private healthcare pathways aligns with a direction the current government has already moved in. Health Minister Simeon Brown identified clearing the elective surgery backlog through greater use of private-sector capacity as one of the government’s five health priorities announced in March 2025. The government subsequently allocated funding for Health New Zealand to deliver 10,579 additional elective procedures by mid-2025 through expanded use of available capacity, including private providers. FSC chief executive Kirk Hope framed the proposals in terms of system capacity. “This is not about choosing between public and private healthcare. It is about using every doctor, theatre, scanner, and dollar available to get New Zealanders treated sooner. When demand is growing and the public system is under pressure, leaving private capacity on the sidelines makes no sense,” Hope said.
As of February 2025, over 74,000 patients had been waiting longer than the four-month target for a first specialist assessment. That persistent demand on the public system is already a documented driver of private health insurance uptake – a trend the FSC’s proposals, if adopted, would seek to formalise through co-funded care models and pricing reform.
The FSC’s call for stable, proportionate regulation arrives alongside a concrete new cost. Budget 2026 introduced a new prudential levy on banks, non-bank deposit takers, insurers, and other financial market participants to help cover the Reserve Bank of New Zealand’s (RBNZ) costs, estimated to recover around $209 million over four years. Of the three categories of entities subject to the levy, the insurance sector is the largest by number, with 81 licensed insurers operating across general, life, and health markets. The FSC’s manifesto calls for “balanced, proportionate regulation that protects consumers without choking off investment, competition, and innovation” – language that sits in direct tension with an incoming cost that has not yet been distributed across the sector.
The manifesto also calls for combined employer-employee KiwiSaver contributions to rise progressively to 12% by 2032. The gap between that and current settings is substantial. Under Budget 2025, the default contribution rate for both employees and employers will rise from 3% to 3.5% from April 1, 2026, and again to 4% from April 1, 2028. The FSC’s 12% target is triple the current default. Hope also called for the elimination of total-remuneration arrangements that allow employer KiwiSaver contributions to be absorbed into existing salary packages. “An employer contribution should be exactly that – the employer’s contribution. It should not be taken from someone’s own pay and handed back wearing a KiwiSaver badge,” he said. The FSC said it is prepared to work with all political parties on the proposals ahead of the November 7 election.
