I believe that all the states automobile ownership laws contain provisions for "self insurance/responsibilty" however that "SR" clause is typically expensive or cumbersome to establish. In other words, consumer insurance is the convenient and economical method of meeting statutory requirements, not a monopoly.

As to other issues in this thread:

Most modern auto policies are standardized ISO documents, tailored for each state's minimum requirements, so it's important to know what your state's regulations allow or disallow. Some states have "fair adjustment" regulations for insurance companies that set specific criteria for handling claims; most states have consumer protection divisions that will intercede on the consumer's behalf since insurance is a licensed and regulated industry in all states.

Generally, any ambiguity in an insurance contract will be resolved in the consumer's interest, since insurance is generally viewed as contracts, not only of adhesion, but of exclusion. However, it does require that the consumer take responsibility for knowing what is and isn't covered and who has control over claims decisions. Typically, the biggest dispute is over "actual cash value" when a vehicle is deemed "totaled."