Nor should they. If they could pay that ridiculous rate then they wouldn’t have a problem not having insurance. You’re presenting it as someone that buys a 300k house and gets a $1500/mo mortgage doesn’t “want” to pay $8500/mo in home insurance.
It’s better insurance just isn’t available at any price. You can know going into the purchase that the home will be uninsurable so your financial picture needs to account for that.
Also in general I don’t believe you can get a mortgage without home insurance? So people buying these properties would have to come in cash.