Canadians haven’t learned their insurance ABCs

Asurprising number of Canadians lack a basic understanding of some of the most fundamental concepts of insurance, according to research conducted on behalf of the Insurance Bureau of Canada (IBC).

In a study of 3,220 Canadians, undertaken by the research firm Pollara, only a small majority (58%) of respondents knew that when a person pays for home and car insurance, the insurance company pools the money with other people’s premiums in order to pay claims for all of a company’s customers.

A total of 41% of respondents believed their money was:

• set aside to cover future claims by the individual who paid the premium (14%);

• used in some way unknown to the survey respondent (26%);

• used in some other fashion (1%). Only 28% of respondents correctly defined the word “indemnity” as “providing financial compensation for losses.”

Almost all (90%) of Canadian policyholders interviewed expressed confidence they had the right auto insurance coverage, even though 32% of the respondents said they had never read their insurance policy.

Among the most prevalent myths among Canadians about insurance is that a person’s health condition matters for the purpose of calculating car insurance premiums. Only 18% of Canadians knew that this to be untrue.

(Policyholders must only sign a declaration that they are medically fit to drive.)

Another error, believed by 40% of survey respondents, is that the colour of a car has a bearing on insurance premiums. •