There's a lot wrong with this argument. First of all, a primary concern when buying insurance is proof of the solvency of the insurer. That means the insurer has to hold the capital covering their outstanding risks. So any insurer that can prove solvency also has to sit on a ton of capital instead of using it productively, which means the minimal insurance cost of a contract is going to be value * (risk + r * time), where r is the expected rate of return on capital.

Adding on N redundant insurance contracts increases the total cost of insurance by N * value * r * time, assuming that the risk of insuring another insurance contract is extremely low. That number explodes extremely fast, and there's no obvious way to solve the problem apart from buying insurance without blockchain-based proof of solvency. But if you're doing that, why do it on the blockchain at all?