Homeowner's Insurance requires electrical panel replacement after 40 years
Is that a standard thing? Nope.
So this is either a peculiarity of that company (read: they don't want your business) or, they are requiring it in your location because they know something about electrical practices in your neighborhood that you do not... e.g that the original builder scored a great deal on Federal Pacific panels, or that one particular drunk electrician did a lot of really bad work in that town.
The other wildcard we don't know is what the insurance company may have learned about your house.  For instance, if you had a home inspection done, and you forwarded that to them, they may be looking at a photo and seeing something you missed, i.e. would you even know a dangerous panel if you saw it?
But no -- it is NOT a standard thing, and the rest of your questions would need to be poised to the particular insurance company... or to a different insurance company lol.
What needs to be corrected depends on the nature of the panel.  Federal Pacific gets a different answer than Challenger than Pushmatic than CH.