Sometimes the FAA shows real wisdom... with many things, you're allowed some leeway to either be smart or stupid.
Yup.. pilots, for the most part, are on an honor system. By holding whatever certificates, ratings or endorsements they might have; there's an agreement between them and the rest of the world, that they'll use those credentials responsibly.
Is instructing as a non-current CFI; while not insured as a CFI; a would-be pilot who holds no student pilot certificate, nor any non-owner insurance policy of his own; including actual landings; before even completing any type of ground school; on more than one occasion; a responsible use of those privileges ?
That's not for me to decide... I'm just answering a request for my opinion