Fishy, sorry but whoever told you that has got their facts wrong - it's actually the other way around.
Up until early 2005 the only recourse open to disgruntled policyholders was to sue via the courts.
From February 2005 all uk motor insurers became subject to regulation by the Financial Services Authority. This introduced a formalised complaints process that all regulated companies are obliged to follow. One element of this is the right for dissatisfied policyholders to take their case to the Financial Ombudsman Service (FOS) for independent review/adjudication - the result of which is *binding* on the insurer.
So, Andy, don't give up the fight just yet. If I were you I'd now write (use Recorded Delivery) to the insurers explaining that you wish to lodge a formal complaint, and setting out full details of your case - do make sure that you include as much info as you can about your track day cover phone call (date, time and name of person you spoke to if possible).
Whilst you're at it also tell them that if the matter is not resolved to your satisfaction 'you will leave me with no choice but to refer the matter to the Financial Ombudsman Service'.
Insurers have to pay for the FOS investigation/adjudication (even if they are 'cleared' of any wrongdoing) - so the mere threat of FOS referral will sometimes results in the insurer reconsidering it's original decision.
Hope that helps.
James