That's a weird formulation. To me, the most surprising thing is that people insure... wrong things. I mean, there are exactly two reasons to take insurance:
1. The economical effects of the event you insure against are beyond your comfort zone.
2. You are for some reason confident that the insurance company has miscalculated your risk profile.
Now, I ignore the second one. The question is, why people take travel insurances that cover lost sunglasses? I mean, to me, it would be obvious that the equilibrium is that people choose so high deductibles that they just can afford/are comfortable with, which means cheaper insurances for two reasons: Insurance company pays out less money and needs to do less work per paid out dollar. But high deductible insurances are almost non-existent.
I think the answer could be a quite mundane appeal to 'bundling'. i.e. I get very comprehensive travel insurance when travelling to the US due to the punitive cost of healthcare (your (1)). This comphrensive insurance can often cover unrelated and unneeded items, but it's hard to slice and dice the coverage exactly.
Essentially, we make all these tiny little bets every day, and while it's possible to hedge them[1], it's complicated compared to just straight-up money-based insurance.
[1]: I can for example reserve a table at a fancy restaurant halfway to the important meeting, so if I get stuck on my way and miss the meeting I can at least get a nice meal out of it, at the cost of the table reservation.
I forget who, but one person I respect a lot in risk management said that "the only surprising thing about insurance is that people don't get more of it."
But of course, it's not always a net gain. And even a rule of thumb like "for expensive things insure, otherwise don't" has problems. That rule would have lead me to get unemployment insurance, but doing the numbers I realised it would be a net loss, even considering the Kelly criterion.
You have to make the computations each time to bet rationally.