If you have extraordinary "good luck", you may come out ahead in the lottery. And if you have extraordinary "bad luck" you may come out ahead in insurance.
Insurance of course has a more practical value, and a much better return on investment (even if it averages negative returns)
Only if you put zero value on the peace of mind that comes with having insurance against risks that, if they happened, would bankrupt you. But if you put zero value on that, you wouldn't buy insurance.
Only a fraction of the consumers come out ahead if we only consider monetary value. But the whole reason insurance and the lottery exist in the first place is that there are other kinds of value besides monetary value. In the case of insurance, it's peace of mind. In the case of the lottery, it's whatever entertainment value comes from being able to visualize yourself winning, even if your chances of actually doing so are tiny.
Only if you put zero value into seeing your savings go up with the amount you saved on insurance.
the decision of purchasing insurance or not depends more on how many resources or alternatives you have, and if you can easily smooth over an uninsured bad event so that it doesn't wipe you out. for individuals with limited resources who will be wiped out if uninsured, it is very rational to buy insurance, including paying a profit margin to the insurer on top.
another way of thinking about insurance is a way for groups of people to pool and share risk -- if they don't get hit by correlated bad luck then they all get to smooth out their bad outcomes.
Usually, individuals with limited resources can't really be wiped out: there is not much to wipe out.
Here is my perspective: I consider myself typical individual with limited resources: I'm mostly live on the my salary (Software dev), I don't really have major assets (20k car bought for cash, renting a house), have some savings (~30k cash). And I only have minimal car liability insurance, as required by law.
So, what kind of "wipe out" event can happen to me / my family? And what kind of insurance do I need to get for that?
Let's say I have auto accident and I'm liable for million dollars. The likelihood of such event is low. Such event probably would result in bankruptcy, but it's not much worse, then constantly paying extra for insurance. So, there is "no wiping out" in this seemingly catastrophic event.
So, what I'm saying is "individuals with limited resources" often doesn't have much to wipe out, so they don't have to worry about insurance.
I find that ironic, because we actually have medical insurance and unemployment insurance here in USA, but we often see "individuals with limited resources" wiped out for reasons you mentioned.
Consider the same accident and you fracture your spine, leaving you paralyzed neck down. Insurance (at least in the US) affords you access to medical care, and access to follow up therapy and other resources to (hopefully) recover completely.
If you have limited resources and no insurance, the consequences are a lot worse than bankruptcy.
If you're interested in equality and justice, you should be in favor of insurance (and insurance-like government schemes like social security) and against lotteries.
On the other hand, the good thing about lotteries is that they can be used to raise money for a good cause with entirely voluntary contributions, and even for most people who don't win, it can still be considered pretty cheap entertainment.