I find it difficult to believe that anybody would knowingly rent an aircraft with third party only insurance. I am also surprised that the CAA permit training under these circumstances.
I completely agree! If FTOs are effectively offering lessons and renting out aircraft with, what is in effect, third party only insurance, then this is plain wrong.
Even if a student was made fully aware what was happening in return for cheap rates, you have to question the ethics of doing such a thing and whether the student fully understand the consequences. Flying is an expensive game and saving £10 or £20 p/h will draw attention and encourage take up.
Certainly hiding the insurance SCAM in the small print is not on, I doubt anyone is actually told they are hiring 3rd party insurance only!