If they were technically unauthorised for that flight, that might very well 'technically' invalidate their insurance, might it not...?
Things work differently in Indonesia than in the US or Europe. The official rules and the real rules don't really have as much overlap as you might expect. This is true both regarding insurance and regulations. Put another way, rules in Indonesia are flexible things but there is a lot of scrutiny into how they are bent.
If they were flying four days a week, chances are the transportation ministry knew what they were up to.