Oh -
Americans need insurance in Mexico
Illegal caught in the USA driving without insurance are released
Hmmmmm.
I imagine the Mexicans are not that friendly if you don't have proof of insurance in Mexico -
No, you don't have to have it. It's for your own protection. It's also a special insurance you can buy if you are traveling further into Mexico.
You just better have your 'papers' in case something happens.