Can an insurance company refuse to insure (home insurance) me if I meet their requirements now, but did not meet their requirements before.

If it is used for a business, it is "commercial," regardless of the zoning. There is additional potential liability that comes from having a business that a company selling homeowner's insurance might choose to not take on or cover. Having told the company that you were using the space commercially, they might not believe you if you tell them you are no longer doing so; or else they may fear that you might go back to using the space commercially.  They are entitled to not insure you when you were using the space in a way not covered by their policy.

You might need to go to other insurers, and you may need to be prepared to pay something of a premium for a policy that would also cover space that might be used for home business or commercial purposes.