This is not free market, but a captured regulated market. Companies bet that the government will cover over their mistakes. In an actual free market where the company and the people making the decisions would be held accountable for the damages done to 3rd parties, this would not happen. The need to insure would motivate people to find cost effective ways to make it safe. Consequential failure is a big motivator.

I work for a place that is regulated by the city and insurance. I find the city to be unhelpful, unresponsive, and largely useless in helping us. They just want the fees paid. The insurance companies, however, will send out inspectors that work with us to right anything that might be unsafe, explain their concerns, and generally are looking to have a good profitable relationship with us.

There was one company that did not do good inspections. We stopped working with them and now work with a different company. I have no such option for working with the government as we are quite locally based.

Also, the city owned sewage treatment facilities are major polluters. Government control often leads to pollution (see various authoritarian governments, our military, various municipalities,...)

As for the sense of mutual obligation, it has withered, but my bet is that it is the theoretical outsourcing of it to government which has undermined it. Without that failing crutch, we would have to work together and look out for each other, bringing to the table immense social pressure for those outside social norms. That has its own downside, but it is much more flexible and resistant to corruption than the monopolistic government power structure.

One danger is, of course, rich outsiders who can take over large tracts of land with money. But in our current system, they buy up politicians who use eminent domain to take the choice away from the owners and the people at large. In a private ownership system, they would have to convince everyone to sell which is way harder to do.