I grew up in Chicago and pronounce it the second way. When i lived in Wisconsin and Indiana I only heard it pronounced the second way. I live in southern Illinois now and have heard a couple of people pronounce it the other way, but not many.
I always thought INsurance was a suth’n thang. Born and bred in the upper midwest, the only time I hear INsurance is from someone with a twang in their voice.
I am one of the two people who voted for #1. I’ve never been to Malaysia. 
I have lived in two western states but have now lived in the upper midwest for ten years. I also grew up in Europe and sometimes people pick up on me pronouncing things differently and ask if I’m Canadian.
It sort of feels like I’m saying it wrong, now that I think about about it. But it’s how I say it. IN-shrance.
Hmmm…southern Illinois isn’t really far from Kansas – one could call them both “Greater Missouri” 
So the IN-surance zone might be centered on Missouri (which is a funny blend of South and Midwest, in several ways), with some usage a bit beyond.
As for the idea that it’s a general Southern US thing (as opposed to, say, just Greater Missouri), I doubt this, only because there have been over seventy responses to this poll, and it would be a strange coincidence if so few (maybe none) of these were from Southern Dopers (recall that there have been only two “IN-surance” poll-contributors so far).
Chiroptera, don’t give up on the idea that you picked this up when you were living in either of those “two Western states”. Many US culture traits moved in pretty straight lines from east to west (as people made those moves through the 19th century), so it wouldn’t be too surprising if there is indeed a narrow band of “IN-surance” from southern Illinois through Missouri, and out to some Western state like Colorado or Utah.
ekSTORshun
It’s not necessarily some kind of “condition.” And it’s not necessarily the case that he perceives it subconsciously. There are many languages, dialects, and accents that do not depend on intraword syllabic stress for meaning. Japanese, for example. It’s very possible that in some corner of New England, there’s a dialect that is not stress-timed.
Possibly. I did mention French being more thus, and parts of New England do have French Canadian influence.
But the condition described (from what I can tell) is more than just “not using much contrasting syllable stress in ones’ own speech”, but rather “not well perceiving it in the speech of others” – and I doubt very much that he has only ever conversed with people in is own little corner of New England.
If he wasn’t trained to make a distinction at a very young age – that is, the people around him when he was learning speech didn’t use stress-timing – then it may very well be difficult for him to learn to perceive it later in life.
That could very well be the case. Rather like how few of us can perceive meaningful phonemic distinctions in the others’ languages which don’t exist in our own (e.g., Hindi’s “aspirated* p*” vs. “unaspirated* p*”), even if we hear someone speaking the language for hours on end (unless we make a conscious effort to learn the language, including its phonemic distinctions.)