It's not got anything to do with any ombudsman - since 2009 insurance companies writing vehicle insurance are bound by EU law.

This states that there are no circumstances where an insurance company can void a properly applied for and paid up vehicle insurance policy.

If they include stuff like must be mot'd and taxed in the contract it's null and void by this law.

THat is true for third party claims.

However, for claiming for one's own car, this is what the ombudsman says:

Most motor policies contain a specific requirement that the vehicle must be maintained in a roadworthy state. When deciding whether it was reasonable for an insurer to reject a consumer’s claim, we will look for evidence that the loss or damage was mostly likely caused – or was significantly contributed to – because the vehicle was not roadworthy.

An insurer can also reduce a payout on the basis that the vehicle was not in good condition. In these cases, we will look for evidence that the condition of the condition of the vehicle – or parts of it – were poor to decide whether this deduction is fair.

If the vehicle did not have a current MOT certificate, we will consider how likely it was that the vehicle would have passed an MOT test. If we decide – on the balance of probabilities – that the vehicle would have failed the test, we are likely to say that a deduction of up to 10% is reasonable.

Even if the vehicle was in perfect condition they will still use it as an excuse to significantly reduce the pay out. It happened to my relative years ago, They got confused as to which car was due an MOT and MOT'ed the car that had recently been MOT'ed. The car with the just expired MOT was then written off by a Police LDV van. The payout on the car was a fraction of what it should have been and of course they were unable to get an MOT as the car was no longer in a roadworthy condition.

Hence people challenging the payouts via the ombudsman. As you'll see above, a reduction of 10% for a car which is roadworthy but where you forgot to do the test would be regarded as reasonable.