Insurance != free. Nor is paying a claim.

That means future cost of buying similar insurance will rise.

Hopefully they had Nationwide insurance because they have accident forgiveness policies. Your rates don't go up after your first launch accident.

but it did cost millions to insurance company

If the insurance company is doing its job right, this was priced into its rates.

Then the failure wasn't free. This customer and all other customers paid for this failure. Other customers, who may have done more and more expensive work to avoid failure, are stuck paying for this failure. Insurance thus incentivizes a race to the bottom -- using other customers to finance ones own risk.

Then it cost millions to a lot of people.

Which is understood by all those people when they purchase insurance. This isn't news. Spreading the risk around is why people buy insurance in the first place.

Billions, not millions.

One launch is dozens of millions, not billions.

are only cargoes insured or is the entire launch vehicle insured? I am curious as to how an insurance company assess risk in these launches, let alone what the starting point for any insurance would be relative to the value of the rocket and cargo.