Roughly one in ten Medibank policies lapsed in the past year, and at nib the ratio was closer to one in six. Those lapse rates, disclosed alongside both insurers' results for the year to 30 June 2026, go a long way to explaining why customer retention now sits at the centre of the private Health Insurance story.

Medibank Private (ASX:MPL) and nib holdings (ASX:NHF) both still grew their resident books in FY26. But both reported higher lapse rates than a year earlier, meaning each had to win more new customers simply to stand still. nib explicitly linked its higher lapses to household budget pressure and heavier industry switching.

What a lapse rate tells shareholders

A lapse rate is the share of policies that cancel over a year. Every lapsed policy has to be replaced with a new sale before an insurer records any net growth, and new sales usually cost more through marketing, broker commissions and introductory offers.

Retention also shapes the claims pool, because price-sensitive members who leave or downgrade can shift the risk mix. That is why both companies talk about "disciplined" growth rather than growth at any price.

Medibank: two brands, two very different lapse profiles

Medibank's FY26 results, released on 20 August 2026, showed a group lapse rate of 10.5%, up 40 basis points. Underneath that sat a split: the flagship Medibank Brand lapsed at 9.3%, while the lower-cost ahm brand lapsed at 15.0%, up 60 basis points.

Net resident policyholder growth was 22,100, or 1.1%. Most came from ahm (up 13,500, or 2.4%) rather than the Medibank brand (up 8,600, or 0.6%). Non-resident policy units, which cover overseas students and workers, fell 2.3%.

Financially, group Revenue rose 5.9% to A$9,115.2 million and underlying net profit after tax (NPAT) rose 2.9% to $636.8 million. Health Insurance operating profit rose 3.8% to $769.8 million, with gross Margin steady at 17.0% and the expense ratio flat at 8.0%. Net Investment income fell 13.9% to $178.9 million. Statutory NPAT rose 27.5% to $638.7 million, a reminder that statutory and Underlying Profit can move very differently between years.

How Medibank is trying to keep members

Medibank's retention tools lean on rewards and a growing health services arm. A summary of the result records $48.6 million paid through the Live Better rewards program in FY26 and a blended group Net Promoter Score (a customer-advocacy measure) of 21.9.

The Medibank Health segment, which includes the Amplar Health business, lifted profit 31.3% to $100.7 million. For FY27, management expects that segment's profit to grow about 25%, PHI gross margin to be broadly consistent with FY26, and aims to grow Market Share "in a disciplined way". The full-year Dividend rose 6.7% to 19.2 cents, fully franked, representing a Payout Ratio of 83.0% of underlying NPAT.

nib: faster growth, higher churn

nib's FY26 annual report, released on 24 August 2026, showed Australian residents health insurance (arhi) policyholder growth of 1.9%, with net margin inside its 6–7% target range. The report said "higher lapse rates highlighted the ongoing pressure on household budgets" and that increased industry switching affected pricing, retention and margins.

A published transcript of the results call records management citing a resident lapse rate of 16.2%, running above 17% in the second half. Management attributed part of this to deliberate choices, including exiting uneconomic corporate groups, and pointed to elevated churn through broker channels amid competitor promotions.

Group underlying operating profit (UOP) rose 9.1% to $260.9 million, but arhi UOP fell to $187.9 million from $207.8 million. nib's results release linked that decline to risk equalisation Volatility (the industry scheme sharing high-claim costs between funds) and higher offer costs. Statutory NPAT fell 5.9% to $186.9 million.

On cost control, nib's release highlighted a hospital benefits payout ratio of 88.8% and a non-marketing expense ratio of 5.3%, which it described as the lowest since 2007. Its premium increase of 5.47% took effect from 1 April 2026. On the call, management said 85% of net growth came through its target silver category and noted consumers shifting towards higher excesses and lower levels of cover.

A side-by-side of the churn treadmill

Adding lapse rate to net growth roughly estimates how much new Business each fund had to write. By our calculation, Medibank needed gross additions of roughly 11.6% of its resident book (10.5% lapse plus 1.1% net growth), while nib needed roughly 18.1% (16.2% plus 1.9%).

Metric (FY26)

Medibank

nib (arhi)

Lapse rate

10.5%

16.2% (call transcript)

Net resident policyholder growth

1.1%

1.9%

Implied gross additions (our calculation)

~11.6%

~18.1%

Resident insurance profit ÷ revenue (our calculation)

9.3%

6.2%

The last row divides Medibank's Health Insurance operating profit ($769.8 million) by premium revenue ($8,267.9 million), and nib's arhi UOP ($187.9 million) by arhi insurance revenue ($3,012.7 million). The comparison is approximate: segment definitions differ, and Medibank's figure includes non-resident business.

nib's lapse profile sits closer to Medibank's ahm brand (15.0%) than to the Medibank brand itself (9.3%). That suggests the more useful like-for-like test may be nib against ahm, although Medibank does not report profit separately by brand.

Where the comparison has limits

Both insurers use a 30 June year-end. But lapse rates may be calculated differently, and nib's 16.2% figure comes from the call transcript rather than the Annual Report extract reviewed. nib also runs businesses Medibank does not, including New Zealand insurance, the nib Thrive NDIS plan-management business and nib Travel.

nib's Diversification cut both ways in FY26. New Zealand UOP recovered to $27.5 million from a $2.9 million loss, and international inbound UOP rose 15.1% to $35.1 million, while travel and NDIS Earnings slipped. nib's full-year dividend of 34.0 cents included a 5.0-cent special.

Risks and signals worth tracking

The shared risks are affordability-driven downgrading, claims Inflation feeding into risk equalisation, and intense switching. nib guided to FY27 group UOP of $265 million to $285 million, excluding nib Travel and subject to risk equalisation outcomes. Medibank's required Capital ratio stood at 13.3%, above its 10–12% target, while nib reported a gearing ratio of 15.2%.

Useful indicators include each fund's half-year lapse rate, the split between net growth and gross sales, Marketing and commission costs, and the outcome of the next annual premium round. Both stocks remain S&P/ASX 200 constituents; neither was affected by the September 2026 index rebalance.