So long as the bitcoin community is rife with pirates, scammers, fraudsters, conmen and hackers then there is a role for theft insurance. No one actually thinks air gapping, paper wallets or cold storage are ideal solutions (it's an internet based currency but the only way to protect it is take it off the internet?!  That's crap).

This could eventually lead to fully insured hot wallets which is where we need to be IMHO.

If you think the answer is individuals teaching themselves current best security practises then bitcoin won't get very far.  The average Walmart shopper is not going to teach themselves Linux just to use bitcoin.