I understand your point of view, but why do you feel this is owed by the insurance company?
The insurance company owes the policyholder indemnity, and that is, the cost to repair the vehicle.
The policyholder has the ultimate say who does the repair. The insurance company paid for an OE airbag replacement. The shop (most likely) unknowingly put the counterfeit in.
It is between the owner of the vehicle and the body shop at that point.