Canadians not worried about their financial institutions: OSFI

Canadians are generally confident about the state of their financial service providers, concludes a survey commissioned by the Office of the Superintendent of Financial Institutions.

Conducted by Environics on behalf of the OSFI, the biannual Public Confidence Survey found 91% of Canadians are confident about the financial health and stability of their bank, while 83% of those with life coverage are confident about the state of their life insurance provider. The survey also tracks property and casualty coverage — 80% of those with property and casualty coverage are confident about the health of their provider.

Almost across the board, there is little to no change in the sentiments of respondents to the same survey in 2005.

Eighty-five per cent of the roughly 6,000 respondents say they are customers of a bank in Canada, versus 87% in 2005. Aside from Quebec, the number of bank customers by province averages 90% to 93% of the population. The stronger proliferation of credit unions in Quebec drags down the national average; only 64% of Quebeckers use a traditional bank.

Of those who don’t use a bank, 80% use a credit union for lending and deposit services. Fewer than 1 in 10 respondents use either a brokerage or trust company for lending and deposit services.

Substantially fewer Canadians use a life insurance provider (58%), although that percentage is unchanged from 2005. The study notes there is a much higher saturation of life coverage among older, more educated and wealthier respondents.

The survey finds very few Canadians are concerned about the solvency of their financial providers. Only 11% of respondents worry about their bank getting into financial difficulty, and only 17% of those with life coverage worry about the prospect of bankruptcy of their insurance provider.

Concern about P&C coverage has dropped from 24% in 2005, while concern about the solvency of life providers has increased 4% during the same period. It should be noted that the survey was conducted during April and May, well before the ABCP liquidity problems arose in August. There is no data to determine if confidence has eroded since then.

The majority of respondents are also confident their financial service providers have the resources to protect customer deposits or payout claims. In fact, 90% of respondents who use a bank are confident their money is safe.

A vast majority of respondents with life coverage (86%) are confident their life insurance company has the resources to pay back claims. Eighty per cent of respondents are confident their P&C provider has the resources to pay claims.

Having the resources to pay a claim and actually paying it are two different things, but the survey didn’t ask whether customers were confident their claims would be paid.

One glaring departure from the 2005 data is the number of respondents who identified themselves as private pension plan members. Only 24% of respondents are members of a private pension plan, a full 10 percentage point reduction from two years ago.

Of those who are in a plan, 58% say they are in one that provides a fixed income throughout retirement, 31% say their pension’s payout will vary, and 10% don’t know what kind of plan they are in.

Regardless of what type of plan they are in, though, nearly three-quarters of pension plan members either agreed (32%) or strongly agreed (40%) that their pension will be able to pay their benefits when they retire.

This confidence extended to a belief that the government was doing a good job protecting the rights of private pension plan members. More than half (54%) of respondents either agreed or strongly agreed with the statement “government regulation or oversight works to protect plan members’ rights.”

Interestingly, about the same proportion of respondents doubt the government would bail out a struggling pension plan. Fifty-four per cent of respondents do not believe the government would be able to prevent plan members from losing their retirement benefits if a plan was in financial difficulty.

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com

(10/30/07)

Mark Noble