Insurance isn't a magic word.

Insurance works on risk profiles. Insurance also works by limiting exactly what situations they do and do not cover (see: All the people who 'thought' they had flood insurance over the years).

Something tells me insurance is going to be a lot more expensive for BTC, which can have a range of impacts that will make it unpalatable for the average consumer, if they or online services can even get (try insuring a Audi R8 under an 18 year old's name...)

That's all true. It's also the only way anyone is going to trust an online bitcoin wallet. Why is it surprising that it would be expensive?

Not surprising; 'Insurance' is less likely to have the impact people are saying it will - either it will be incredibly hard to get insurance in the first place (making it more of a non-factor), and/or it will not provide the same level of coverage/safety-net as you get with a Bank, and hence BTC will never get to the same level of trust.

Either case, I don't think 'Insurance' is going to be the magic thing that will make BTC as viable as traditional currencies.

Nobody in their right mind would insure Bitcoins.

Probably not for the reason you think.

Actuaries happen to be quite good an quantifying risk. If the price is right, someone will be willing to insure it. An insurer with a specialist background in systems and security could do well.

The actual problem is the implications of underwriting a fiat currency with a "real" currency.

You may as well be insuring cigars against arson.