The Insert->Hyperlink function will only bring up the Hyperlink dialog if the selected text is already a hyperlink, so you can edit the hyperlink.
If you want to be able to insert a hyperlink where none previously existed (having selected no text or non-link text), you need to assign the Edit->Hyperlink function to the keyboard shortcut (note the difference in the lower left box):
Yes, the command names listed in the Shortcut Keys table is the same, and they bring up the same dialog box. But they are different functions, and the categories are swapped from the intuitive mapping.