Of course if you add water it will lower it the index. All food that is not diluted in water will trigger an insulin response. That is how digestion works. Otherwise you'd have type 1 diabetes.

How is possible for people to crave steak and eat lots of steak despite having no sugar if the theory is that sugar causes a huge reaction and people to crave more sugar after eating it?

Blaming sugar ignores that all food triggers a spike of dopamine and insulin reaction, unless it's diluted in a lot of water. This is why vegetables are safe for diabetics, due to being so diluted. Jason Fung, Taubes and other fitness/health influencers keep spreading this carbs-insulin nonsense.