The insurance charge isn't a levy, it's an optional charge which you can say no to. Granted, it's nasty that it's set to purchase by default, and you have to opt out of it, but you don't have to pay it.
Travel insurance integrated into the booking process can massively increase sales. Moreover, the reason for customers having to de-select an option (in this discussion, travel insurance) if they don't want it is obvious: it can massively increase sales. Indeed, flyBE says* that by changing from the option not being automatically selected to being selected (so customers must de-select it if they don't require it) resulted in a 60% increase in travel insurance sales.
* Page 23 on http://www.airlineinformation.org/co...Gill_Flybe.pdf