This is a very interesting idea, the problem is you're going to have to get governments to accept it as legal insurance, in which case it's pointless, like with currencies there is a monopoly over insurance policies, like I said in my earlier post, we have compulsory car insurance in the UK, so you'd have to make sure to provide legal paperwork before you operate in that country as well as others and if someone wants to make a claim there's all other sorts of bureaucracy and even attending court.
I think it would be practical in a purely Bitcoin economy where we finally got rid of paper money, but as it stands now I suspect insurance companies aren't going to go along with it and exercise their influence.
By paying people directly and ditching the old premium model, we can skirt all the old insurance regulations and categorizations until we gain traction. Then we can tap our government contacts and lobbyists when we are more established in order to get that classification so vital to compulsory insurance compliance.
See here for the bitcoinstarter for the project.