One big problem I can see is that insurance only works for the individual disaster.

An accident of some sort, with low probability but high cost. The insurance paid by everyone insured is used to cover single events like an accident and the operating costs of the insurer. That works as long as the the expected accident costs to be covered are lower than the insurance premiums paid.

Now the trouble is that if difficulty rises, it rises for everyone. That's eg similar to a situation where a house insurer has to face claims due to flood affecting all of the houses insured. Now typically this is a catastrophy, and the insurer would not be able to pay - that's why he usually is required to be insured himself (Eg in Europe the "Muenchner Rueckversicherung" insures insurance companies for this class of disaster).
That means for your business idea, that in case of a big difficulty increase you will have to payout to everyone insured, which in turn means you cannot on average payout more than what people have paid you. You can up your payout a little bit if you also allow people to be "insured" against lower difficulty increase than expected - but that only makes your shop a betting outlet, with low payout multipliers. Which is of course a problem because you will find less people to participate in your scheme.