Insurance Reserve
The insurance reserve is funded from premiums deducted from members’ accounts, the tax benefits from the payment of premiums to the insurer and investment earnings on the reserve.
We use the insurance reserve only for insurance-related purposes to:
- collect deductions and pay the insurer the premiums
- pay for the operating and administration costs for insurance and claims
- provide premium price relief to insured members
- set aside money to meet the financial obligations of our insurance providers
- fund strategies to reduce insurance claims over the long-term
- develop and improve insurance offerings
- implement legislative changes.
We have an arrangement with the insurer under which:
- we may receive a payment from the insurer in years where the level of claims compared to premiums is low
- we may be required to pay the insurer in years where the level of claims compared to premiums is high. These payments will not exceed 10% of the premiums paid for the relevant year
- any payments we receive from the insurer must be used for insurance-related services.
The table below shows the payments made from or received by Cbus in relation to the above arrangement over the past four years.
| Financial year | Amount received by Cbus |
|---|---|
| 2021/2022 | ($32,290,663) paid by Cbus |
| 2020/2021 | ($43,580,110) paid by Cbus |
| 2019/2020 | ($32,200,00) paid by Cbus |
| 2018/2019 | $39,364,566 received by Cbus |
We aim to maintain the insurance reserve at 20% of the annual premiums paid to the insurer. We also allow for contingent liabilities to the insurer (payments that may arise in future for historical claims). There is a minimum amount we must maintain to ensure we can meet our obligations.
At 30 June 2022, the actuarially assessed contingent liability on a tax adjusted basis to insurers was $83,597,355 and the insurance reserve had an additional $19,951,168. As the insurance reserve is in a solid position, Cbus is applying part of the reserve to reduce premiums for insured members.
Each year we review the level of insurance reserves (including any premium price relief for members). A level of premium price relief for members has been in place for many years. The level of relief reduced slightly from July 2022 following greater relief between September 2017 and June 2022.