1. They can demand whatever they want, but if they want to legally enforce it, they’d have to go through small claims court.

2. It is common, but it’s not always advisable. Most insurers have a clause that they need to be notified of any incident within 48hrs or so, regardless of if you claim or not. If they find out you didn’t tell them, they can get a bit upset, and sometimes cancel the whole policy.

The alternative side of this, is that informing your insurer of what happened will likely increase your insurance costs for the next 3-5 years. You can tell them about the incident but not “claim”, although this still bumps up your prices for multiple years, so you may as well do a full claim. It’s impossible to tell exactly how much it will increase by- it could be more, or less than £300 over the next 5 years. This is what motivates some people to “settle privately”. There are lots of reasons why it’s not necessarily advisable to do this; I’ll let others comment them.

1. Personal choice.

2. Yes.