To turn on the arachnophobia setting in Monster Hunter Wilds you need to enter the 'Options' menu that appears on the main screen before you enter your game. You cannot toggle this setting once you're in game and it must be done before you load a save file.

In a game about fighting giant scary monsters, Monster Hunter Wilds’ arachnophobia mode fails at its most important job. It’ll turn little spider-like creatures into slimes, but it doesn’t touch the massive ones you fight for several minutes at a time — one of which shows up only a few hours into the game.