Rewrites throughout, adds Medibank statement and further details

Feb 26 (Reuters) - Australian health insurers nib Holdings NHF.AX and Medibank MPL.AX raised their premiums on Wednesday, after the federal government approved a hike ahead of federal elections in May.

Nib increased its health premiums by an average of 5.79% while Medibank hiked its by an average of 3.99%, both effective from April 1.

The Australian health minister, Mark Butler, approved an average industry premium increase of 3.73% in healthcare.

Additionally, Medibank said New South Wales (NSW) customers will see an average premium increase of 4.81%, higher than the rest of the country, due to the NSW government's request for higher payment for private rooms in public hospitals.

"Medical costs remain high, especially hospital costs, wages and medical supplies, which drive premiums up," said nib CEO Ed Close.

The insurance industry in Australia, a country grappling with high living costs, is also poised to face scrutiny from the Liberal Party if it were to come to power after its leader Peter Dutton last week accused insurers of exploiting customers.

Insurance premiums have spiked over the past year, with Australian Bureau of Statistics data revealing a 16.4% increase, marking the largest rise in about thirty years.

Higher mortgage repayments amid a cost of living crisis have stretched household budgets.

The Australian insurance market is dominated by major players Suncorp Group SUN.AX, Insurance Australia Group IAG.AX and QBE Insurance QBE.AX.

Suncorp, in response to Reuters request for comment, said it does not underwrite health insurance, while QBE did not immediately respond.

(Reporting by Sneha Kumar in Bengaluru, additional reporting by Nikita Maria Jino; Editing by Sumana Nandy and Shailesh Kuber)

((Sneha.Kumar@thomsonreuters.com;))