You shouldn't use a service inferior to one the buyer was charged for.
Selling untracked is usually more profitable, you just have to be up front about what kind of shipping is included in the listing. The reason it is more profitable, is that within Canada you can ship for between 2-6 dollars instead of an average of 15. If you want your items to sell, you have to provide the most value. A big part of that is charging something in the range of market value. So if an item is worth $40, you can't charge $40 + $15 shipping because a $40 item typically won't sell for $55. You can either charge $35+$5 shipping if you ship with lettermail, or you can charge $25+$15 shipping if you ship regular parcel.
To keep it simple and with round numbers we'll just ignore eBay fees and say with the first example you are making an additional $10 of profit every time you successfully complete an untracked order without an item not received claim. So every four items you sell, you make enough additional profit to cover the cost of 1 lost item. If you sell 50 items a month all at that price point, you'd have to be losing more than 10 items to INR claims for tracked shipping to start ot make sense. (My math might be atrocious here, but hopefully you get the point). So for most sellers, lowering your input costs and opening yourself up to INR claims is more profitable than raising your input costs as insurance against INR claims.
Now my examples were using Canadian shipping, as far as US shipping goes, I had a lot of issues with Canada Post to the point that I stopped using them entirely for US orders. Maybe things have changed, but Small Packet USA (which is the cheapest untracked service) was taking 45-50 days in some cases. It got to the point where shipping to the USA made no sense with the losses via INR claims, and the additional time and effort wasted on listing items that I wouldn't realize a profit from, and providing customer service to people waiting on their items. That might have changed now, but I would just be cautious about Small Packet USA with Canada Post.
An important thing with both Canada and USA shipping is to go into your shipping settings, and change your service to one of the generic 'Economy' services. This will give the buyer a more realistic idea of when to expect their item. It will also make it that they cannot open an item not received claim until around 30 days after they purchase the item. Given that untracked services (in a worst case scenario) can take 20-30 days, and that the buyer sees this possibility when checking out, I think this is fair.
Through reading comments other people make here, a lot of INR cases get opened not because the buyer is scamming the seller, but because the seller didn't properly set their listings with economy shipping. They make the logical (but wrong) assumption that if they are shipping via lettermail, they should select lettermail as the shipping method in the listing. This leads the buyer to wrongly thinking the item was lost when it doesn't arrive within the 15 or so days eBay gives for lettermail. So an honest buyer opens up a case, which all could have been avoided with a more realistic shipping window (economy shipping).
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