Self-insurance is a lot cheaper than buying insurance, in my experience. Tracking is cheap here in the US but really expensive (I have heard) for people from some other countries, including Canada, so I can see why they wouldn't purchase it (I wouldn't, as a buyer, necessarily want to pay for it, anyway).
I assume people aren't lying. I have had something I purchased here confirmed as delivered when I didn't receive it; turns out it was delivered to another address and eventually made its way back to the seller, who kindly reshipped it to me.
It's rare enough an occurrence that giving buyers the benefit of the doubt is worth it.