The efficient market price for increasing and decreasing risk is zero.

If you can find people with complementary attitudes toward risk. Your example does indeed create risk--but in a risk-averse world, nobody would want to buy those contracts. Insurance arises from large entities with high capital and thus high relative risk-neutrality assuming the risk of smaller, more risk-averse entities for a price. If this market can be made efficient, the profits thus gained may be small, but insofar as all private insurance-providing organizations should be risk-averse to survive, the profits cannot be driven to zero.

It may not even be the case that they are small--depending on the structure of the market, a sufficiently large and risk-neutral organization may be able to become something of a natural monopoly, with its size reinforcing its risk-neutrality, and any competitors having difficulty entering without being large at the outset.

Re: the human utility function, I think I agree. I've been interested in Eric Weinstein's work on introducing gauge theory into preferences to make them usefully invariant, but I think you're right that they are too fatally flawed to ultimately discern naturally.