It really seems to me that in American English, every word eventually gets watered down to mean either "good," "bad," or "very." Take the word "terrific" for example. It used to have connotations of terror. Now it's just another synonym for "excellent." Or "fantastic," the old meaning of which is still found in the related "fantastical," but now simply means "very good." Or "incredible," which used to mean "not believable." I could go on.

And when every superlative has been watered down like this, you need to pick a word that's completely over the top to express anything with any strength of feeling. It's good, it's great, it's awesome! It's fantastic! It's incredible!! It's insanely unbelievably wonderful!!!

"Insanely" is just the latest entry in our internal linguistic arms race.