There is a small remark in Rational Choice in an Uncertain World: The Psychology of Judgment and Decision Making about insurance saying that all insurance has negative expected utility, we pay too high a price for too little a risk, otherwise insurance companies would go bankrupt.

No -- Insurance has negative expected monetary return, which is not the same as expected utility. If your utility function obeys the law of diminishing marginal utility, then it also obeys the law of increasing marginal disutility. So, for example, losing 10x will be more than ten times as bad as losing x. (Just as gaining 10x is less than ten times as good as gaining x.)

Therefore, on your utility curve, a guaranteed loss of x can be better than a 1/1000 chance of losing 1000x.

ETA: If it helps, look at a logarithmic curve and treat it as your utility as a function of some quantity. Such a curve obeys diminishing marginal utility. At any given point, your utility increases less than proportionally going up, but more than proportionally going down.

(Incidentally, I acutally wrote an embarrasing article arguing in favor of the thesis roland presents, and you can still probably find on it the internet. That exchange is also an example of someone being bad at explaining. If my opponent had simply stated the equivalence between DMU and IMD, I would have understood why that argument about insurance is wrong. Instead, he just resorted to lots of examples of when people buy insurance that are totally unconvincing if you accept the quoted argument.)