Follow your gut, that's usually the right choice. I agree with what others have said, let the parents know that you don't like their decision and why. If they or others think you're a D-bag, so be it, then again maybe someone else is feeling the same but hasn't said so due to fear of being outcast from the group and may step up.
I don't know about other states, but (from past experience) in Oklahoma, if there is an accident and no insurance, the owner of the vehicle will be held responsible. Not that it makes it ok to ride/drive without insurance.
Whatever you do, keep the rubberside down & at least one wheel on the road.
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