It is a surprise to me that anyone summiting has access to insurance at all. I suppose that if the fraud rate is as low as 3.5% and insurance is contracted specifically for the trip, then a rational payor will raise rates and carry on.

On the whole, there is finite capacity of certain assets, like helicopters. If the emergency carrying capacity is X and true emergencies are .6 X then there is spoiled capacity of .4 X, in which fraudulent emergencies are placed, keeping everyone in the system whole so that when true emergencies approach .9 X there is no need for fraud. This follows the "optimal amount of fraud is non-zero" and eliminating this fraud might remove the margin needed for the system to exist at all.

  An anecdote tells of the British government's bounty on dead Indian cobras 
  giving locals the perverse incentive to start breeding the snakes, to be able 
  to kill more of them and collect more bounty

The people in the article are just trekking around the valleys, not going for the summit. I did a summit attempt a while back and didn't bother with insurance because here wasn't much they could do - helicopters didn't go that high and getting some sherpers to carry you down would be better achieved with cash.