In those cases where the government handles recording all transfer, there is typically a fund which covers loss due to fraudulent or erroneous transfers. Thus there is still title insurance, it's just hidden from view.
A lot of Americans would rather pay $1000 to a private service than $900 in higher taxes. It's the principle of the matter. Government bad. Privatization, "choice" between the oligopoly businesses, and public-private partnerships good.