To an extent, but insurance also serves a vital economic function of allowing people to spread out risk.

The counter-parties in insurance are also sophisticated businesses who are highly motivated and capable of tracking down a significant portion of fraud.

The counter-party in prediction markets is other gamblers who usually have no ability to investigate fraud whatsoever. The prediction markets have some motivation to prevent fraud to protect their reputations but they don't directly lose any money from fraud, so they aren't going to do it nearly as effectively as an insurance company.