I have tried the same thing in Word from Microsoft Office Home and Student 2019 Click-to-Run and I have no problems inserting an image in any of the same previously-created Word documents. This does not happen with every previously-created Word document, only a particular set of documents in which one of them has always been used as the master to create another similar document. Word will describe any issues found and will also show the number of occurrences for each type of issue. Select the Word version you want to check compatibility with and uncheck other Word versions. And then, in THIS document, I can insert an image file. In the Microsoft Word Compatibility Checker dialog box that opens, click Select versions to show. If I copy the entire contents of the previously-created document and paste it into a new document, all of the contents will paste correctly. And then, if I copy (CTL-C) the image file that is in the new document, it will paste (CTL-V) into the previously-created Word document, which wouldn’t allow it to be inserted. They may want to do so if they have solutions that are not compatible with some elements of real time coauthoring, such as add-ins that would.
However, if I open a new Word document and try to insert the image file, it WILL insert. This policy lets admins disable Real Time Coauthoring. I have a previously-created Word document in which I am trying to insert an image file, using Insert>Pictures>This device>click on an image file (.jpg, png). I am using Microsoft Office Home and Student 2016, Word 2107, Build 14228.20204 Click-to-Run.