I would say because it’s their job to serve their customers, even if they’re abroad? Especially for a travel insurance company.

You don't think a travel agency selling policies covering china should have their sysadmins ensure that their customers can actually make use of those policies? They can always explicitly exclude china if they don't want to deal with this but then they wouldn't have gotten GP's money.

It's not a random sysadmin. It's a sysadmin of a travel insurance company.

if the government in question is supportive of said problem entities, they won't "deal" with it

If the government in question has free reign on regulating said traffic, it's an avenue for repressions and censorship

Otherwise it's a legal matter to seek action against such entities, which is already how it works

(... but I'm afraid we're actually mostly talking about "scenario 1 entities" here, which makes it futile to seek action from the very offices that already play a role in making it harder to use existing legal means)

Government needs lobbying to act

That's like asking why don't we expect burglars to not burgle, they won't, but that doesn't mean walling off a whole neighborhood is the solution either.