TP Side Mirror while insured with "XS Direct Insurance" back from 2022 - becomes a 6K debt.

Aretnap

The crucial part is "payments have been made in relation to the settlement of the Third Party claim in accordance with the Underwriters obligations under the Road Traffic Act." NOT "in accordance with the terms of your policy", or any similar wording.

They are not paying a claim under the terms if the policy. They are claiming that the policy doesn't apply, for whatever reason, but that they were obliged to cover the third party aspect of the claim anyway as RTA insurer.

The excess is a red herring. The OP needs to find out why they think the policy didn't apply at all.