Sam, in the UK at least an insurance company can say or decide whatever they like provided it cannot be challenged by the wording of the policy. If they want to insure an act they can even if it is illegal. Other insurers of course may take a different attitude. If you have it in writing you are insured, but it doesnt mean it is legal. So unless your only concern is any insurance claim I would set aside the insurer's view and rely on the legality or otherwise.