D8 insert an image already uploaded to node

The Insert module should work on existing image fields just like on new image fields. If your intention is to insert a styled image (instead of a plain link), you would need to select the style in the Insert Image field widget configuration on the content type's Manage form display tab.

Did a quick test and it works as expected in my plain test instance:

• Added an image field to a content type.
• Added a new page of that content type with uploading an image.
• Switched the form display setting for the image field to Image Insert.
• Edited the page again and clicked the Insert button.

Without setting any image style(s) on the image field the Insert Image widget is applied to, the image will be inserted as link. So, the content of your after screenshot seems to be correct in terms of what I would expect. Yet I noticed a minor bug: The plain link's title should of course be the image's title, if provided, instead of the file name.

It is a bit distracting that the preview image in your before screenshot is broken, I guess that is by prupose as I did not experience a broken image when testing.