Are you suggesting that some people should be priced out of using the internet?

This is exactly what I was talking about, insurance companies will use the fact that you need access to something to erect a giant money gate in front of it, justifying it with advanced tech that helps in some ways but is almost always used out of context based on the insurance companies control policies that they force practitioners to follow.

Not out of using the internet full stop, but out of putting internet in every random device, perhaps. If the increased liability of putting internet in your refrigerator gets reflected in the purchase price, so that an IoT fridge has, say, an extra $200 in liability tacked on vs. a non-IoT fridge, many people might choose to buy the non-IoT fridge, which is probably not really a huge loss to society overall.

The insurance market is also relatively free. It's not like there won't be competition there either. Whoever has the best risk modeling to price things appropiately should win.

The phenomenon you describe, demand elasticity, exists just as well in the medical market. There's a lot of rationing going on, explicit or implicit. It's just that the elasticity coefficient may be lower compared to the smartphone market.