Fair, though that would be a much more compelling observation if anyone had ever succeeded in implementing a full-fledged insurance policy in the form of a smart contract.

I'm curious, for example, how you'd get an errors and omissions clause working in Etherium. Like, how would Ether arbitrate a claim against that policy? Assume, for the sake of argument, that hard AI has not been invented yet.

You're correct that hard AI would be necessary for the blockchain to perform autonomous arbitration in cases where human discretion is necessary.

In practice, this is solved by giving the contract the capability to query an external system (referred to as an oracle), which provides the results of the independent arbitration as an input to the contract.