The gap between how much Canadians say they value insurance and how little they actually know about their own policies comes down to one thing: the product itself can be intimidating, according to Kristen Gill, vice-president, general insurance at TD Insurance.
A new TD Insurance survey found that while 85% of Canadians see insurance as an important financial safeguard, half cannot say what coverage they currently hold, a contradiction Gill said reflects how difficult policies are to actually parse.
"I can see why insurance is intimidating," Gill said. "You get a very thick policy with a whole lot of information. It's very much in legal terms, so it's not easy to read. Opening up this big package can be extremely daunting, especially for somebody who maybe doesn't spend their whole life thinking about insurance."
That same intimidation factor, Gill said, is part of why so many Canadians are unsure whether their coverage would actually protect them if something went wrong, even as they recognize insurance matters in principle.
"People understand fundamentally that insurance is important, but understanding what exactly they are covered for, why it is important, and what it means, is a lot of information to put together," Gill said.
The confusion is most pronounced among younger Canadians, the survey found, with 55% of Gen Z saying they would consider reducing coverage to save money, and 62% saying they would specifically reduce coverage when money is tight, roughly double the rate for the general population. Gill said several factors compound to make Gen Z more likely to cut back.
"Gen Z, for one thing, are very busy. They're also likely to be more financially strapped because they could be saving for their future, or just starting out in a newer job," Gill said. "So the temptation to cut coverage is greater."
Higher baseline premiums make the temptation stronger still, Gill said, since a percentage cut translates to more real savings on an already expensive policy.
"Gen Z, looking at auto insurance, most likely will be paying higher premiums," Gill said. "So cutting 10% off of an expensive premium is obviously more financially helpful in the short term than cutting 10% off a lower premium that an older adult might be paying."
Many in this group are also navigating insurance for the first time without the benefit of experience, Gill said, having recently come off a parent's policy and taken on their own coverage decisions for the first time.
"Getting themselves grounded on what they need to think about, what they need to know about the importance of insurance for perhaps the first time, is something that they might be going through as well," Gill said.
That same education gap shows up clearly once young drivers actually understand, in concrete terms, what their coverage protects against, according to Morgan Roberts, vice-president of RH Insurance, Ratehub.ca's in-house brokerage, who has watched the gap play out firsthand with two teenage drivers of her own.
"I don't think that they have any idea that if they're hurt in a car accident, coverage comes from there," Roberts said. "I know my kids didn't, and they've grown up in the insurance industry. That's if their friends are hurt in an accident and they're in the car, that's where coverage comes from."
The problem, Roberts said, isn't that young drivers don't know insurance is required. It's that they don't connect that requirement to what actually happens after a real accident, since most think only about themselves rather than the people around them.
"They think of themselves. They don't think of the four other kids in the car with them on what happens if an accident happens," Roberts said, describing how she now walks her own children through concrete scenarios, like the risk of a child darting out near a school zone, to make the stakes tangible rather than abstract.
Gill said closing that understanding gap doesn't require a major time investment, just a willingness to look a little closer at what's actually written into a policy before deciding to change it.
"Most companies have insurance FAQs on their website in very easy-to-read language," Gill said. "Spending a little bit of time can go a long way to giving you that confidence and making sure that you are truly confident that you will be covered for an unforeseen event."
