I don't see why KitSplit wouldn't just cover this out-of-pocket. If it really only happens 0.02% of the time, the cost of reimbursing the lender can't possibly be higher than amount of good-will lost by not doing so.
That may be the problem right there. It most likely happens far more frequently so they can't insure and they can't self-insure. So the loss of good-will is small in comparison to the loss of funds. A broken model with sufficient marketing money behind it is indistinguishable from a working company right up until the moment the whole thing comes crashing down.
Or are you saying that they're lying about the 0.02%?
Yep. Because otherwise they would pay out.
You'd just smash a window or kick in a door then file a police report then an insurance claim.
That way they break out the costs separately (not having to show higher prices), and they could make extra revenue because they are in an additional business.
This kind of thing is already common with other transactions. The cell phone company offers protection plans in case someone steals my phone. Shippers (USPS, UPS, FedEx) offer insurance.
As long as you don't price gouge on it, it also eliminates hard feelings when something does happen because you can say, "Well, it was your decision not to pay the $10 to cover this."