The way I see it, most sellers accept paypal because it quick and convinient, and also allows to buyer to pay by credit card if the seller cannot normally accept payment by CC.
If a £500 record is paid for by paypal, the seller can lose a large chunk of their profit to Paypal.
As for insurance, isn't the buyer covered moreso than the seller...to cover paying for goods that might not be sent by fraudulent sellers?
The seller wouldn't send goods until payment had cleared their paypal account, so how does the insurance benefit the seller?