Unfortunately, you do have to make your insurer aware of any incidents where a claim may be made against them. You have up to 6 months to make your insurer aware of any claim being made against them. What I would do is contact the lady, and enter into a contract where she states in writing that she is wholly liable for the incident but understands that your son has waived his rights to claim from her on the premise that BOTH parties have agreed not to take any action, and to treat it as if the incident never occurred. This then means that as long as no claim is being made by either party, and you have this in writing as an agreement, the insurer has no liability or insurable interest. As such they then do not need to be aware.
Please note this is my personal opinion, and not that of honestjohn.co.uk.

You may find insurer's disagree with my comments and it is recommended that you seek professional legal council on this. Insurer's may advise they refuse to insure you if you do not make them aware of any incident you have been involved in. This is only because they are scared of having claims being made against them and because they advise they were not fully aware of the risk in insuring you if you have not made them aware of any incidents. On providing the written statement you now have from the older lady, each insurer may provide a different response.