For insurance to work you need full information about your clients, their addresses history of previous accidents and so on.
What is the point using bitcoin as payment method for service if you will still have to provide information of that nature?
The amount of related paperwork makes regular insurance ineffective for small claims.
A $500 standard deductible may be a pocket money for some, but there people who wouldn't mind to reduce even such risks.
So a bitcoin-based insurance service fits this niche very well.