That's what I tried in a similar situation. We dropped our offer by about 10%. Some of that for the increased insurance premium and some for the likely trouble selling in the future. They said no and put it back on the market.
They sold about 18 months later for about our revised offer.
Thanks for the advice folks.
What would you do? Try and argue the price down, whilst making sure that it is structurally sweet and accept the insurance hike?