This is not strictly true, you have to prove that you are insured not the other way round.
In Lancashire Constabulary now have the power to remove vehicles under s.165 RTA.
If the officer believes that the vehicle is not insured then the vehicle will be recovered and only released when a valid insurance certificate can be produced.
If the insurance company does not have your details on the Police database but you are insured the vehicle can still be taken away. If in this case the vehicle is insured that can be proved and so the vehicle would be released without having to pay any fees. Obviously unless you can prove at the roadside the vehicle will still be taken away.
It is officer discretion but the power only lies with Road Policing Officers here and not section bobbies.
Hope that clears it up.