This is a nice fantasy, but realistically it means you shouldn't use probably 90% of services out there, which isn't reasonable for most people. Plus, there are plenty of companies with treasure troves full of data on you that have equally questionable data security/privacy practices that you've never even directly interacted with.
We need regulation. There is no other alternative. And we need to stop blaming victims of data breaches for companies not putting basic security measures in place. I don't think it's unreasonable to expect every company you interact with to securely store your sensitive data. If a place was physically making people ill like in your thought experiment, they wouldn't be around for very long; I think we should demand the same for our data.