If it comes down to a decision between good quality insurance and keeping the vendors you've used in the past, I'd say the insurance is more important (ie. look for different vendors or at a minimum - which I don't recommend - negotiate price concessions in exchange for assuming the vendors' liability). I don't recommend it because your price reductions are capped at what you negotiate while the HOA's liability may be unlimited. If you can negotiate an indemnity clause that's capped at some level close to your cost savings, that's maybe OK, but I don't expect the vendors to agree to that.
Sheila's suggestion of talking to your insurance agent about other associations' experiences is a good one.
Thinking out loud here... It may depend on what the vendor expects to be indemnified for - some things may be reasonable and others not. If they're using an indemnity clause to get around providing the normal sorts of warranties or guarantees that you'd expect, that's not good. Or if they're using it to avoid insuring their own workers, ditto.
Accidents can happen on the job, and even excellent workers can do things that damage their clients' property. But I think that accountability for such things is part of the risk of doing business. The client has no control over the things for which the vendor wants them to assume liability, and the client's insurer may not be able to accurately assess the risk. Meanwhile the vendor does have some level of control. IMHO vendors should properly price their services to account for these added costs.
If associations assume the risk, it's also counterproductive for them in the long run since the vendors have less incentive to perform at a high level. I imagine the marketplace will probably sort this out eventually: vendors who demand indemnity clauses will get less work - and if they lose enough clients, they'll maybe rethink their approach.
Another interesting article written by a lawyer whose firm represents co-ops and condos:
Indemnity Clauses: What Your Board Needs to Know