The armrest on my 116i is fine. Silly question but is it standard or have you got the snap in adapter fitted?
In terms of being asked to pay for insurance it's becoming fairly standard these days. The first time I had to it was £10 to be added to the policy and more recently it changed to a per day fee.
The VW dealership I used to use did offer the chance to put their car on my insurance which my insurer did for no fee as both cars wouldn't be in use at the same time by me. One time I did that and when I got to the dealership they apologised as the planned car was not back and they had to give me a different one for which they didn't then charge for the insurance. Similarly when mine went back for more work a few weeks later (job not properly done) insurance costs were met by the garage.