It should be. Or the insurance company should just be able to run a title check and see the title/car has no lien on it.
Perhaps they want to ensure the new buyer doesn't owe the previous owner anything?
Car shouldn't need to be paid off to insure, though it should be cheaper paid off to insure. Worst case he can get the policy going, and have them recalculate once he gets the title changed fully into his name.