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As long as the seller has been responsible for covering damaged items, you were paying for that. It was simply added into the shipping charges, or of you had "free shipping" it was added into the cost of the product. I don't know anything about Route specifically, but shipping costs have increased over the last couple of years. This was likely done as a way to offset increasing their shipping charges.
If I don't get the item I ordered in the condition I ordered it in and the company decides fuck customer service should've bought the protection, I can simply do a chargeback on my credit card and I'll get my money back.

This is a very bizarre form of highway robbery if it allows you to just opt out of being robbed and not lose anything in the process. What exactly is the view that you want changed here? >

Basically, I want someone to convince me why this is legitimately a good thing and not just a shameless cash grab by businesses trying to get out of providing basic customer service/backing their own product. 
And I can chargeback with a credit card but some people wouldn't know to do that and plenty use debit cards so would have zero protections against businesses screwing them over. >

Legitimately good thing? I'm not sure. Shameless cash grab, though? I don't think the loss of that 99-cent fee is making a huge dent in company profits, especially since it's to pay for an external service and they likely only charge you for it since that service represents an extra expense for them. This is just them outsourcing an aspect of service that they used to deliver themselves and no longer have to. Businesses do this all the time. I wouldn't necessarily call it "good" but in this case it seems pretty harmless. 

some people wouldn't know to do that and plenty use debit cards so would have zero protections against businesses screwing them over

The business is always going to be liable but always going to avoid paying money back when they can. Whether or not this Route service exists doesn't really have much impact on that. >

And furthermore, if they're going to put the customer on the hook for shipping insurance, why not give the customer an actual choice of who ships it? In certain places I've lived, I knew USPS would always lose or damage my packages; why not let me choose UPS then so it ends up being less likely that I need insurance at all?