Medical insurance with guaranteed policy wording: the only suitable option?
[OPINION] nib have just demonstrated a consequence of the absence of guaranteed policy wording, unilaterally removing and altering benefits to the significant detriment of a great many policyholders. One could now be forgiven for wondering ‘what’s next’!
Wednesday, October 1st 2025, 6:40PM 
21 Comments
by Steve Wright
Certainty that existing benefits will be there when needed (contractual rights) is vitally important for all types of life and health insurance. It’s integral to the promise of guaranteed renewability inherent in life and health insurance.
Without the guarantee of life and health insurance entitlements, how can there be any confidence in life and health insurance as a long-term concept?
Imagine if life insurers could simply impose (on existing policyholders) new exclusions on life cover for death by certain illness or death by motor vehicle accident, for example.
Life and health insurance is not like fire and general insurance, where policyholders can relatively easily switch to another insurer to maintain or improve benefits. Poor health will very likely not permit a switch.
The issue of guaranteed wording has always been an important advice issue but largely ignored until now as far as I can tell. NIB’s action now make the issue impossible for advisers to ignore.
Without guarantees that current benefits, as a minimum, will be there to protect policyholders in the future:
- What promise are insurers making in return for premiums paid?
- What are advisers asking clients to ‘buy’?
It’s not certainty, it’s not confidence, it’s not control, and it may turn out not to be protection when it’s needed most.
Once properly informed (and exceptional circumstances aside) how many clients would conclude that non-guaranteed products are nonetheless suitable?
The contractual ability to simply amend policy wording unilaterally and exclude existing benefits for procedures or treatments (or add co-payments) for example, may seem like a good idea for insurers, but it is potentially disastrous for policyholders, and has the potential of reducing the public’s trust and confidence in their adviser, insurers and insurance.
If a particular medical treatment or procedure puts pressure on claims costs because of increases in supplier costs or increased claims incidence (perhaps because of a struggling Public Health sector, as we currently appear to be experiencing), then isn’t this precisely the thing policyholders need their insurance most for?
Policyholders certainly don’t need the insurance they signed up for being pulled out from under them.
As far as the implementation of a co-payment goes, aside from hitting clients in the pocket, this may have significant negative flow-on consequences. One can imagine increased pressure on the already struggling Public Health system.
I also wonder how effective the imposition of a co-payment will be in reducing pressure on premiums in the long term. At least some, and maybe many, clients may delay visiting specialists and getting diagnostic tests because they can’t afford the co-payment on top of their excess.
Such delay may well lead to a worsening of their health condition leading to (unnecessary) more expensive treatment further down the line.
Some may argue that health insurer ability to make unilateral changes is necessary to keep premiums reasonable. Thinking about this issue again for the proverbial five minutes, leads me to believe there are better alternatives.
Alternatives that allow policyholders to control the protection they have and the price they are prepared to pay.
Alternatives that don’t destroy policyholder choice, certainty, confidence and control.
Alternatives that don’t deny policyholders the protection they need unless they agree to it.
Steve Wright has qualifications in economics, law, tax, and financial planning. He has spent the last 20 years in sales, product, and professional development roles with insurers. He is now independent and helping advisers mitigate advice risk through training and advice coaching.
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Comments from our readers
On 2 October 2025 at 10:03 am Amused said:
All excellent points raised here by Steve Wright. In this day and age, I don’t know why an adviser would still be recommending medical insurance to their client if it didn’t have the certainty of guaranteed policy wording at claim time.
On 2 October 2025 at 10:45 am JPHale said:
Well said, Steve, thanks for continuing to add your voice to the old drum I have been beating for a couple of decades.
The continued view of medical-only providers, with this being the way things are done, fails to appreciate that life advisers providing holistic risk planning, including medical, expect certainty of contract terms into the future.
Unfortunately, most providers of non-guaranteed products in their advice operate on a "they won't do that because..." basis that has no basis. The proof being Southern Cross, Accuro, and now nib changing policy terms to remove or restrict benefits in recent times.
The advisers I have spoken to this week have all reiterated that "we knew there could be a change, but anticipating this one wasn't on the radar."
"But insurers need to be able to adapt and change." Sure, by adding provisions where medical services improve or are introduced, but the choice to remove coverage should remain with the client paying the premium.
Like we have seen recently with Partners Life making baked-in features selectable options on their disability range, medical insurers need to adopt a similar approach to provide choice.
Sure, retaining the premium product will come with higher premiums and likely at a higher rate of premium increases; that's the understood contract and consequence of contract guarantees.
Having the option and choice to remove aspects of the policy (adding a co-pay for S&T) for a lower premium is a good customer outcome approach.
Currently, the nib changes haven't yet been implemented for clients; they are currently being reviewed by advisers, and this is your opportunity to provide constructive feedback.
We all understand that something with nib has to change. As I said to Southern Cross in 2023, this isn't about what is changing; it is about how it is managed.
My feedback:
- This is one of the largest detrimental changes to policy terms I have seen in over 20 years.
- There is a story that can be told around this that nib has not effectively communicated.
- nib has the opportunity to walk this back and take another shot that lands softer with clients. It would also demonstrate to the adviser community that nib is listening and taking on board adviser feedback.
- Taking another run at this: nib offering a choice; stay where you are and take another 20-30% hit at the next renewal, or take this option that restricts benefits as outlined, which doesn't have as much of a premium hit and is more manageable in terms of cost for both the client and nib.
- Add policy guarantees to the historic book to restore confidence that nib has learnt from this experience and in the future will take the approach of providing choice. That choice being the continued contract we have with UHM; increased premiums or take added reduced coverage options for maintained premium levels.
The harsh reality is that we need ALL of our insurers to be in a position where they are providing good, sustainable products. The actions of one, such as nib is currently taking, have a serious impact on consumer confidence across the entire sector.
On 2 October 2025 at 4:27 pm Lifer said:
Here is my 2 cents worth having worked for an insurer or two in my time.
Whatthey are doing is a drastic move and unfair on policy holders.
Competing against non profits who don't pay tax or have shaereholders to pay is always going to be hard ask. Especially when offeing PEC cover is some circumstances.
The most profitable course of action for an insurer is to launch a new product pool. New product claims tend not to reach "steady state " until years 8 to 12, this means enhanced profitability from younger, healthier lives having less claims initially.
So buying a book like the old Club Life health book was always going to have an impact. No new lives in an aging book that had offered very generous undewriting and benefits in orderto grow the book from inception, was always a risk.
Guaranteeded wordings only leave one option for insurers - price. And it tends to not end well for policy holders in the long run.
One solution could be regulation forcing both health and life insurers to only run one pool. If they buy a book they have to merge the pools and give clients the best of both. Also theyshouldn't be allowed to start a new pool/book of business, they should have to enhance the current offering for all clients. This should include an obligation to look after the systems the policies are run on and ensuring they have trained satff to manage the policies.
It is my understanding that in terms of the difference between life and health policies, health policies are yearly renewable just like fire and general policies, specifically because of the changing nature of medical advances. Life policies are not yearly renewable but for a set term, or to a set age so there is certainty.
On 2 October 2025 at 6:22 pm JPHale said:
@Backstage, it's always been a disclosure issue for SOAs. I sorta made sure of that with my article on the subject a month before the new rules, in Feb 2021.
It has been a key point in my SOA with clients since I started as an adviser in January 2012. This is not a new issue by a couple of decades, but it has never been used as severely as it has with this round of changes.
On 2 October 2025 at 6:33 pm JPHale said:
Thanks for the additional insights Lifer. The challenge of benefit removal remains with the lack of choice and implications for those who are relying on cover that is removed.
Price is a well-understood issue with policy guarantees; at the same time, the AIA MajorCare book, which is also guaranteed, while having its challenges, isn't wildly out of step with current premiums. So it can be managed, and this book included group before it was closed.
The contract distinction is one that insurers can hide behind, as I have said elsewhere. If they genuinely wanted to, as they have been saying, they wouldn't change things like this; they could implement the guarantees like Partners Like and nib have with UHM.
I've been told by my Accuro people that they wouldn't pull things from the cover, and I always replied, "Put it in writing", while they have just applied a $200k lifetime cap to back surgery. Not quite as bad as what's happening with nib, but another example of if the will is there, they can do it.
On 3 October 2025 at 9:37 am Sigh Master said:
The main points of COFI (Conduct of Financial Institutions Act 2022, NZ):
Purpose
To ensure financial institutions (banks, insurers, non-bank deposit takers, etc.) treat customers fairly.
Do the recent changes, excessive premium increases and excessive delays in processing met this definition?
Also not all clients are being treated fairly as not all are allowed to migrate to Ultimate Health age, claims just 2 of the reasons the rest we have absolutely no idea why they won't allow - so good to say everyone should be in a guaranteed wording policy just how do we make this change when the options are not there either due to a NO from nib or health issues stopping clients from going elsewhere.
BTW it is my understanding there is no guarantee around the excess so they could decide to only allow large excesses such as 4k - don't think they can't given what they have just done.
Secondly,
I believe that there is a requirement to also treat advisers fairly - to simply send out this information in email form with no thorough explanation given they only just had roadshows the opportunity was there. No full explanation of why this action has been taken and why they have seriously deflated the value of a policy that the client has chosen to take out.
So where is FMA or do we have to approach them with our concerns at how we and our clients are being treated.
Commission will be the next target surprised it wasn't the first to be honest.
On 3 October 2025 at 2:06 pm Paul Flood said:
@Sigh Master – we already know where nib stands on the issue of commission. Here is what they said in their 2019 submission on the COFI options paper:
“A key conflict of interest in the insurance industry is that arising for ‘commissioned advisers’. The opportunity to address this issue under the Financial Services Legislation Amendment Act and Code of Professional Conduct for Financial Advice Services has been missed. Unless this inherent conflict is clearly addressed and managed the implementation of conduct duties on the industry will struggle to be fully effective.”
“We also support option 4: Impose parameters around the structure of commissions (i.e. commissions paid to intermediaries). Well-structured commissions can play a useful role in ensuring appropriate advice is provided and leads to good customer outcomes. In addition, setting parameters around the level of commissions would create a useful framework for the industry to design commission structures that provide good customer outcomes.
We support the introduction of an express limit on the percentage of upfront commissions as well as the ongoing existence of an appropriate level of trail commission for advisers who do provide an ongoing service to their clients.”
On 3 October 2025 at 2:34 pm JPHale said:
@Sigh Master, you raise some good points, and Steve and I had a discussion around some of these this morning.
There's a line in here somewhere, where good conduct and good faith get questioned. At this stage, I doubt that nib has crossed that line, and this remains in the commercial decisions area the FMA won't step into.
The service level issues definitely are something that needs addressing, and I think that message is being heard, but it takes time to sort it out too.
My understanding is that on the guaranteed policies, they cannot impose an excess change any more than they can remove benefits. They could impose minimum excesses on the other non-guaranteed policies, though at $4k I suspect that would cross the line I mentioned above, with removing or reducing too much of the contract clients have.
The how of all of this is also my key contention. Like Southern Cross' changes in the past, the what is something the insurer can do; morally or ethically aside, it is the legal bit that governs this.
The how is the part that is upsetting advisers and clients, as it has not been effectively socialised and explained to date, thus the reaction from everyone.
Although there is a caveat too, a significant number of advisers don't understand what's been going on nearly as well as they think they do. The massive increase in medical utilisation over the last 3-4 years is why we have what we have with medical premiums and insurer changes. I wrote about this in May with few answers on how this could be solved. https://www.goodreturns.co.nz/article/976524204/medical-premiums-and-the-public-system.html
nib's response here, while drastic and with poorly managed delivery, is the effect of the market we are operating in. For now, the rest aren't indicating dramatic changes, but then we didn't know this was coming from nib last Friday either. Monday morning, we could be hearing from the others in a similar fashion.
What I do know is the continued increase in utilisation of our medical system, coupled with the public system not meeting that need, is going to continue to put pressure on medical insurers, as we have seen. This is going to put pressure on the entire market, driving more of what we have seen this week. Insurers, like every other business, have to balance the books, and the only two levers are either a premium increase or a reduction of benefits.
Which is why the message to all advisers is to use a guaranteed wording product. You can't solve the problem for most existing clients, but you can prevent new clients from being exposed to the removal of choice when insurers move to make drastic changes. That choice then enables the client to choose between two crappy options: pay a higher premium or lose/reduce benefits. Without guaranteed wording, it's both with no choice. That is not what risk management is about!
On 6 October 2025 at 1:12 pm Rob T said:
In my view...I have never understood why any adviser would recommend clients enter a contract that gives the other party unilateral permission to change contract terms and conditions as and when they wish.
If you have a contract with a corporate entity whose legal duty is to their shareholders and said contract gives them the right to change policy wordings as and when they feel fit it is not a case of if but when.
On 6 October 2025 at 3:25 pm The Terrace said:
Since insurance companies, & therefore nib, are monitored by the Reserve Bank I would hope that the bank's oversight is not missing in action while they have been looking for a new boss. On 7 October 2025 at 9:07 am Backstage said:
I should mention that when I meant disclosure, I was thinking of group business. @ Rob T, there isn't a choice of guaranteed wording there, and when they leave the group and keep that plan, they are stuck. We can pontificate about nasty, unenlightened advisers who have marketed a product that does not have guaranteed wordings and pop our chests out and say, That's not me, but... with group business, the poor clients get caught and I am dealing with many. On 7 October 2025 at 9:22 am Backstage said:
@The Terrace, the Reserve Bank could only intervene if NIB were in financial distress. Day to day running of their business or even conduct is outside their scope. I still feel the media have given this subject a soft pass and this should have been picked up.
It has to be a great case study on the worst communication and public relations and customer handling I have seen for years in this industry. I even love how they feel, just not saying anything, we will all forget, and it will go away.
Imagine being an employer with a group scheme learning of this, co-payments!
On 7 October 2025 at 10:36 am Paul Flood said:
@Backstage - I suspect this might see a "soft exit" from the Group space by nib.
I'm not sure how nib administers continuation options when an employer cancels/doesn't renew a policy, but from memory the policy wording is such that being offered the option to continue cover is at nib's discretion. I know that the continuation option is currently offered when an employee leaves employment, but if I was an adviser business I would want certainty around what nib is planning to do for group schemes that cancel/don't renew.
Based on uptake of Premier Health continuation options to date, nib might have enough data to quantify the anti-selection risk they face if there is a significant increase in group scheme cancellations. (Those who have claimed see value in the cover and are more likely to exercise the option.) It might be that nib doesn't have an appetite for this risk, and so might not offer the option? (And maybe they never did when a scheme cancelled?)
On 7 October 2025 at 2:43 pm Rob T said:
@Backstage. Yes for sure, and I'm not saying you should always... because sometimes you can't. For ex group scheme clients especially with passing age and health issues that come with age maybe jumping up and down making a fuss or prodding the media is the only option left. On 7 October 2025 at 3:57 pm The Terrace said:
Having had to suck up a 25-40% increase in premium just to add insult to injury On 7 October 2025 at 5:05 pm JPHale said:
@backstage, relevant point on the group schemes' lack of guarantees and resulting challenges that come from it. I mentioned this somewhere else too.
The answer, as distasteful as it might be to purists, is to "wrap" the group cover with a Partners Life base plan with $10k excess. This solves a number of issues, provided the resulting exclusions are not catastrophic.
PL cover will "top up" the shortfalls of the group cover, sans the group cover excess. It will provide unfunded medication protection with one of the best wordings currently available, and it is also guaranteed.
The major diagnostics portion has a limited excess of $250, despite the main benefit having a substantially higher excess.
This effectively provides protection for imposed issues, such as the nib 80/20 change, where the PL policy on a surgery exceeding $10k will reimburse the claimable 20% specialists and diagnostics that the client is out of pocket.
Where surgery is not involved but major diagnostic tests, such as MRI/CT, are performed, the client has the choice of claiming 20% on the PL policy if the overall bill exceeds $250 or opting for PL coverage with a $250 excess.
With nib, the change leaves endoscopies remaining 100% covered; however, with other providers, there can be limits to accessing endoscopies with higher excesses, leaving the endoscopies also able to be claimed under PL with a $250 excess.
All in all with this, the nib client is limited to a 20% co-pay on lower-value non-hospitalised specialist and testing claims, which isn't too much of an inconvenience in the scheme of things. For those over age 55, there needs to be some consideration about dropping the S&T option and paying their own way with the premium cost vs. the out-of-pocket equation when the policy is "wrapped" as I have outlined.
The reality of this approach is to maintain existing coverage for pre-existing conditions, paying for the bulk of the investigation and treatment costs. In contrast, the "wrap" offers long-term certainty of coverage, including unfunded medicines and mitigation of potential future changes, where benefits may be reduced or removed.
Not to mention the $10k excess gets waived with cancer, heart attack, and stroke.
I've been doing this with clients since 2012, when I started, and it works superbly in managing long-term future risks when the client is unable to transition to a more suitable, fully guaranteed benefit.
And it should go without saying, this is not personalised advice, and you should seek advice from a suitable qualified adviser before taking this further. There are considerations regarding the appropriateness of this approach; underwriting terms will determine whether it is a suitable or effective approach.
On 9 October 2025 at 10:32 am The Terrace said:
Makes you wonder if nib has ever/could ever do the same thing to its Australian business? On 9 October 2025 at 1:11 pm JPHale said:
@The Terrace, my understanding is not so much. The industry in Aussie is quite heavily regulated in a number of ways. Premiums and product being two that need regulator oversight as I understand it.
The other aspect is premiums apples for apple are double and my understanding is the providers are expected to cover pre-existing conditions, making the whole structure of products quite different to administer. Not to mention there is the MediCare aspect to how things operate too.
Aside from double the premiums, Aussie’s approach to provision of health care is potentially a model we should look at. Where the individual gets to decide how they pay for healthcare, either though Medicare and their tax or rebates on tax and private insurance. Either way, people are having to specifically contribute to their own healthcare.
On 9 October 2025 at 5:44 pm Snoopdog said:
Pretty sure nib is covering pre-existing conditions (at least after a stand-down period) which is probably driving a lot of claims in the portfolio. On 11 October 2025 at 7:12 am JPHale said:
@Snoopdog, many of their direct products include the EasyHealth product with advisers, as well as their campaigns with the Ultimate Health range. Though the impact of this on the UH range doesn't seem to be significantly out of whack with the rest of the market in relation to premium changes being applied.
We are now seeing the current 22% increase for the UH range wash across the 16.2% increase from September last year, but that's not significantly different to what we're seeing with Southern Cross' year-on-year premium changes, and all but Accuro are still relatively similar pricing between age 25 and 55...
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I think NIB should sell their book to someone who can manage it better and head off back to Aus. An outrageous move, leaving clients and NZ advisers in a very difficult position.
I really think more needs to be made of this, and it needs media attention.
I am astounded that they feel just an email to advisers is enough to smooth this over.